I remember sitting in various stockbrokers office during the early 1980's listening to 'experienced', elderly and wise stockbrokers discussing the upcoming 'Big Bang' in the City and many of them saying that the exchange, the market, the country would rue the day allowing bankers, tom, dick and Harry to compete alongside existing old style brokers. Almost to a man they said that stockjobbers should NOT merge with brokers and that external regulation would eventually destroy the market and kill free enterprise. Now 26 years on we're almost at the inflection point for this with millions more than just angry with bankers, politicians, anyone in services industries per se and the extraordinary thing is that no-one can see the completely inane and destructive force of REGULATORS and REGULATION. They have brought nothing to the table, cost taxpayers billions of pounds (austerity?), frustrated all aspects of business especially businesses with small capitalisations and the best part is they are never answerable to their critics, their errors, their failures and are masters in blaming everyone but themselves.
The lessons to be learnt from the experienced experiences (one needs to be a patient patient sometimes) has allowed me to conclude that REGULATION as envisaged in 1986 and 2000 (when FSMA 2000 replaced FSA 1986) has been a total disaster. RDR today is counting down to 1st January 2013 and the heads are already rolling, including mine. In this environment you're either a Roundhead (pro-RDR) or a Cavalier (probably Austrian school)....anyway.
The Leveson Inquiry report has been published this week and just like what has happened in the City the same appears to be happening in Fleet Street. What is at stake here is FREEDOM per se NOT just the freedom of the Press. As has been stressed more than once the vast majority of journalists conduct themselves with 'decorum' and never disgrace their publications, their Editors nor importantly their readers who are their lifeblood. There are a few swine in every sty that need culling and the whole debacle of the ongoing debate fails miserably in realising that the existing PCC has failed in its task of compelling journalists to take their ethical guidelines seriously. What is needed is a stronger PCC with much more independence. What is NOT needed is any form of PRESS REGULATION. If the current crop of Hacked Off supporters and others are given too much platform (Hugh Grant et al) then it is NOT just our PRESS FREEDOM that is at stake here. It is FREEDOM itself. Private Eye and others would likely not survive the next inquisition.
For those who believe in regulating the press please contact any established, experienced and wise stockbroker who worked prior to Big Bang for their take on the matter. Even though there is no (manipulated) poll here I doubt any would back the Hacked Off brigade.
Next stop Moscow comrade!
Sunday 2 December 2012
Wednesday 28 November 2012
SIXTEEN TRILLION AND COUNTING
Each individual pallet is 42" wide by 40" deep. The height of the US$100 bills is 38.7". Add 4" for a pallet and the total height of one pallet of bills is 42.7". In a theoretical field of pallets the pallets are spaced 12" apart.
The field is 50 pallets x 100 pallets by 2 pallets high, so...
width = (50 x 42") + (49 x 12") = 2100" + 588" = 2688" = 224 ft
depth = (100 x 40") + (99 x 12") = 4000" + 1188" = 5188" = 432.33ft
height = 2 x 42.7" = 85.4" = just a little over 7ft high
So our field of pallets is roughly 224ft x 432ft x 7ft high.
At 96,768 square feet, it's about 2.2 acres and well over the size of a football field.
----------------------------
The next time you turn on your television and hear democrats, republicans, liberal democrats, tories, whigs et all discuss any form of National Debt spare a thought for the american middle classes who are staring at bankruptcy. Many people have stated publicly that future generations will pay for this debt. In simple terms they cannot. The maths are unworkable. There is no solution. How exactly does one pay off a meaningful amount of this debt? Let's now look at the back of the fag packet and scratch a pencil mark here;-
$16,000,000, 000,000 (16 Trillion or sixteen thousand thousand million) divided by the working population of USA of circa 154,400,000 = $103,626.94 per each working person in USA. According to Wikipedia the Per Capita wealth of each US citizen presumably working is US$48,450 each. There are 30 million smaller businesses with around 91% working in the Private Sector. This contrasts dramatically with that of Europe and UK where the Public Sector is becoming the ever more dominant employer.If hypothetically each working citizen could put their hands on say $50,000 of hard cash (debt) and gave it to the Federal Reserve then presumably 50% of the debt could be cancelled but it begs the question, what does the citizen get in return? That still leaves around $8 trillion which is still unworkable. No fag packet calculation is being even considered for interest and inflation and no social assumption is being made for government total ownership of property which is plainly proposturous. So what is the solution? Well, it's clear that the US cannot grow its way out of this hole. It cannot sell anything as there would be no buyers. It cannot tax its way out of this hole as there would be virtual 100% unemployment (versus 10-20% today depending on who one believes). Somebody or some corporation has to pay and this is the dilemna. There are $100's billions of $'s held on deposit at US businesses in an already arguably bust banking system. In fact the banking system arguably is a slave to the 'new corporatocracy' that has been created (Apple is just the tip of the cash rich iceberg). Assuming that there's no great technological evolution or invention around the corner then it's fair to assume that the TMT sector could be (soviet style) nationalised (that would cancel somewhere under $3 trillion of debt). In fact the corporatocracy is effectively the state anyway so let's throw BP (now mostly owned by US institutions), Chevron and the entire o&g industry into the mix.
Hell, let's all work for the government. Free enterprise has pretty well been extinguished already. I see that the Fleet Street Letter is now predicting total financial collapse with UK leading the charge.
Anarchy in UK then.
Hell, let's all work for the government. Free enterprise has pretty well been extinguished already. I see that the Fleet Street Letter is now predicting total financial collapse with UK leading the charge.
Anarchy in UK then.
Tuesday 27 November 2012
Harvey Goldsmith for Prime Minister
Years ago I went up to Wembley Empire Pool (I think it became the Arena years later) with my good friend, Jim Penfold, a musician today of 35+ years standing to see Paul McCartney & Wings appear in concert. I remember that it was an amazing gig with Joe English's drumkit projecting the first ever lazer show during the bond theme "Live & Let Die". Afterwards Jim suggested we sneak around the back to see if we could get in amongst the band and their groupies. Jim had jammed on occasions with Denny Lane in deepest Sussex (Rye country) so neither of us didn't really think it'd be a problem. Security though had other ideas and prevented us from getting in so Jim suggested another route via the rear stage entrance where the juggernauts loaded the vast amounts of p-a systems (speakers, stacks, amplifiers, etc) on/off the Wembley stage system. We had got through the high metal fencing and were spotted by someone who looked quite threatening and scarpered (70's slang). I recollect the chap was in his 30s and heavy built wearing a leather jacket, long hair. He sprang into his vehicle, a monster Black & Gold Jeep Cherokee with monster wheels and drove past us with some venom.
I hadn't see him for years until I saw him again on the Andrew Marr Show the other sunday morning. In the 70s he was a rock legend. His name is still known amongst those of us 50+ who loved live music. His name is Harvey Goldsmith and he's probably been the no #1 rock promoter for the last 40 years in the british music scene. On Andrew Marr's show he was reading the sunday papers with General Sir Mike Jackson and someone else who was pretty forgettable. I must say I had to take a second look. The idea of Harvey and Mike together sitting on a settee was curious. When Harvey spoke it was measured and both Marr and Jackson listened intently. Asked what he thought about some subject or other Harvey responded unusually. I will misquote exactly what he said but I think it went like this........"....the trouble with this country is that it is run by THE GREAT, THE GOOD & THE USELESS". I've highlighted the "GGU" bit as he said that 100%. It hit a cord with me and I made a mental note.
Now I imagined that Harvey would simply disappear from our screens forever but can you imagine my surprise when he appeared this week on Sky News commenting on the Rolling Stones concert (?). He was sat next to an american and the body language said it all. Even before he opened his mouth, even before the american spoke, one could detect a vein of animosity between them. The american commented on ticket prices and was questioned by the Sky Presenters about the high prices of tickets ranging from £90 (face value?) to around £1,000 (second-hand value). The yank simply shrugged this off by saying that he ran a TICKET STOCK EXCHANGE. Now this phrase stuck with me too because for years ticket touts have been lamblasted (spelling!) for allegedly spiralling the prices of tickets but here was a ticket impresario suggesting he was running an exchange. Bring on the regulator! I jest of course.
Harvey hadn't really said anything until he commented that he felt that fans were getting robbed here. I took notice at this point. Harvey felt it was immoral to allow this exchange to dictate pricing and to overload the high prices to fans (note the old touts would have gone to jail for this). Harvey's main thrust was that he saw a ticket as a cheap gateway for the fan to enter an arena and reckoned that rock stars like the Stones were getting greedy.
This made me think. Overcharging on the way into a contract ultimately scares off investors. Giving some reward once in is legitimate and if there are more add-ons available that seems to be fair and reasonable.
A few months ago I had the same experience myself at a french antiques fair who wanted to charge all adults Euros 10 entrance. There were 4 of us, I was paying and walked away from the door. I may have spent another Euros 300 but wasn't prepared to get fleeced in this way. Whilst crossing on the ferry the other day the lady from P&O advised me that my £70 ticket one way had expired. She insisted upon charging me another £70 for the crossing whereupon I told her that I would boycott the Duty-Free and Langans Brasserie for the trip. I normally spent £100-150 total on these add-on but P&O lost out due to greed. The lady responded that "the owners of P&O needed the money". Well, they lost out and if Harvey Goldsmith is right then the Rolling Stones may well lose some fans if the current internet practice of online ticket agencies (exchanges) inflating ticket prices is anything to go by.
As Mick Jagger sang that night (I presume)......"You can't always get what you want!"
Anyway I think Harvey should enter politics. His thought process is refreshing.
I hadn't see him for years until I saw him again on the Andrew Marr Show the other sunday morning. In the 70s he was a rock legend. His name is still known amongst those of us 50+ who loved live music. His name is Harvey Goldsmith and he's probably been the no #1 rock promoter for the last 40 years in the british music scene. On Andrew Marr's show he was reading the sunday papers with General Sir Mike Jackson and someone else who was pretty forgettable. I must say I had to take a second look. The idea of Harvey and Mike together sitting on a settee was curious. When Harvey spoke it was measured and both Marr and Jackson listened intently. Asked what he thought about some subject or other Harvey responded unusually. I will misquote exactly what he said but I think it went like this........"....the trouble with this country is that it is run by THE GREAT, THE GOOD & THE USELESS". I've highlighted the "GGU" bit as he said that 100%. It hit a cord with me and I made a mental note.
Now I imagined that Harvey would simply disappear from our screens forever but can you imagine my surprise when he appeared this week on Sky News commenting on the Rolling Stones concert (?). He was sat next to an american and the body language said it all. Even before he opened his mouth, even before the american spoke, one could detect a vein of animosity between them. The american commented on ticket prices and was questioned by the Sky Presenters about the high prices of tickets ranging from £90 (face value?) to around £1,000 (second-hand value). The yank simply shrugged this off by saying that he ran a TICKET STOCK EXCHANGE. Now this phrase stuck with me too because for years ticket touts have been lamblasted (spelling!) for allegedly spiralling the prices of tickets but here was a ticket impresario suggesting he was running an exchange. Bring on the regulator! I jest of course.
Harvey hadn't really said anything until he commented that he felt that fans were getting robbed here. I took notice at this point. Harvey felt it was immoral to allow this exchange to dictate pricing and to overload the high prices to fans (note the old touts would have gone to jail for this). Harvey's main thrust was that he saw a ticket as a cheap gateway for the fan to enter an arena and reckoned that rock stars like the Stones were getting greedy.
This made me think. Overcharging on the way into a contract ultimately scares off investors. Giving some reward once in is legitimate and if there are more add-ons available that seems to be fair and reasonable.
A few months ago I had the same experience myself at a french antiques fair who wanted to charge all adults Euros 10 entrance. There were 4 of us, I was paying and walked away from the door. I may have spent another Euros 300 but wasn't prepared to get fleeced in this way. Whilst crossing on the ferry the other day the lady from P&O advised me that my £70 ticket one way had expired. She insisted upon charging me another £70 for the crossing whereupon I told her that I would boycott the Duty-Free and Langans Brasserie for the trip. I normally spent £100-150 total on these add-on but P&O lost out due to greed. The lady responded that "the owners of P&O needed the money". Well, they lost out and if Harvey Goldsmith is right then the Rolling Stones may well lose some fans if the current internet practice of online ticket agencies (exchanges) inflating ticket prices is anything to go by.
As Mick Jagger sang that night (I presume)......"You can't always get what you want!"
Anyway I think Harvey should enter politics. His thought process is refreshing.
Monday 26 November 2012
Opportunity Knocks if you're from over the pond
I was recollecting what DaveCam has so often said about 'Opportunity' in the UK. My confession is that I've blogged about the Conservative hyprocrisy about opportunity before. Let's have a recap shall we?
I've thought for some years that "opportunity for all" as spoken by the great sage actually means "I'd like to give the opportunity to the unfortunate by taking your job and giving it to more worthy subjects". But hehhh, before you think I'm being outrageous and outspoken please spare a thought for the interpreters, who to a man and woman would rather not get involved with ALS and avoid any contact with the new breed of interpreting administrators, or the established, connected and experienced stockbrokers & IFA's who are being subjected to unnecessary examination resulting in 20,000 to 35,000 being expended due to this fascist policy called the RDR. There are plenty of other examples of job replacement all being conscripted in the name of "Opportunity".
In early October at the Tory conference DaveCam spoke again of opportunity....hushed silence......but today's announcement by Osborne at the despatch box of the appointment of the next Governor of the Bank of England, the Old Lady as some prefer to call the building at Bank Tube Station, was pure theatre. Were we going to be told that a member of the MPC was going to get the job, Lord Adair Turner perhaps, that wreckless chap from the FSA, maybe a chap called Tucker, maybe unbelievably Lord Myners, or Lord Hoojie Magfloojie, or god forbid even a 'real' banker of the Cap'n Mainwaring school. Are there any left you ask? There's been some debate since 2008 about the difference between banking and investment banking. After 36 years in the City I like to think that I've got the definition down to a pat.
A banker is someone who works in an establishment called a bank, takes personal liability for his mistakes, and provides loans to business and personal customers at a rate exceeding the Minimum Lending Rate meanwhile accepting deposits against the loans by providing interest at a discount to the MLR (used to be called the Base Deposit Rate). These people called bankers had real integrity and ONLY worked on margin but above all respected their 'customers', never traded against them and never ever speculated.
So what is an investment banker Mr Hoblyn? Well, it used to go like this. When I started in the City they were ALL americans. We had merchant bankers, something quite different but it wan't long before they too became bankers of investment. Now these chaps found businesses, financed them for flotations (IPO's), provided real capital to the economies and were pretty popular people when they allocated good lines of stock at decent premiums till the late 1990's. And then they got greedy. They worked closely with hedge funds, giving them the meat from the pies, started going synthetic derivative based (for another day), took huge risks with their balance sheets, took zero liability for their failures and yet ensured outrageous bonus and pension schemes ultimately getting the people to pay for this through QE (another questionable enterprise).
The masters of the new universe are Goldman Sachs. They are everywhere and yet nowhere. Technocats with GS credentials can be found at the Federal Reserve, also in Italy and Greece, but look more closely they are everywhere and yet nowhere. The hypocrisy of investment banks and their dismantling of businesses is truly astonishing but it's called 'good' business, allowing for global stability. Greece and Italy and other nations in/outside EU have been victims of GS trade strategies (I should say that JPMorgan, Citigroup, MorganStanley do just the same amount of damage or thereabouts).
So I wondered who Osborne was going to name.......I choked at this point. A nice smooth chap with a crooked tie called Carney, a nice chap with Goldman Sachs credentials. Bloody marvellous and just to prove that DaveCam's hypocrisy knows no bounds the chap isn't even a Brit. He's Canadian so that's all right then. Let's all mount up and give him the red carpet.
But I do suspect that there were a few British bankers spluttering on their cigars at this juncture. Good old David Tomlinson from Mary Poppins Mr Carney is NOT.
Thanks for the opportunity Mr DaveCam!
ps One would think that with our education system someone else from Oxbridge (other than Carney) or even Eton or St Paul's might have been offered the job. Anyway my friend Fintag has met Carney and says he's a nice fellow so that's that then. Good luck Carney.....
I've thought for some years that "opportunity for all" as spoken by the great sage actually means "I'd like to give the opportunity to the unfortunate by taking your job and giving it to more worthy subjects". But hehhh, before you think I'm being outrageous and outspoken please spare a thought for the interpreters, who to a man and woman would rather not get involved with ALS and avoid any contact with the new breed of interpreting administrators, or the established, connected and experienced stockbrokers & IFA's who are being subjected to unnecessary examination resulting in 20,000 to 35,000 being expended due to this fascist policy called the RDR. There are plenty of other examples of job replacement all being conscripted in the name of "Opportunity".
In early October at the Tory conference DaveCam spoke again of opportunity....hushed silence......but today's announcement by Osborne at the despatch box of the appointment of the next Governor of the Bank of England, the Old Lady as some prefer to call the building at Bank Tube Station, was pure theatre. Were we going to be told that a member of the MPC was going to get the job, Lord Adair Turner perhaps, that wreckless chap from the FSA, maybe a chap called Tucker, maybe unbelievably Lord Myners, or Lord Hoojie Magfloojie, or god forbid even a 'real' banker of the Cap'n Mainwaring school. Are there any left you ask? There's been some debate since 2008 about the difference between banking and investment banking. After 36 years in the City I like to think that I've got the definition down to a pat.
A banker is someone who works in an establishment called a bank, takes personal liability for his mistakes, and provides loans to business and personal customers at a rate exceeding the Minimum Lending Rate meanwhile accepting deposits against the loans by providing interest at a discount to the MLR (used to be called the Base Deposit Rate). These people called bankers had real integrity and ONLY worked on margin but above all respected their 'customers', never traded against them and never ever speculated.
So what is an investment banker Mr Hoblyn? Well, it used to go like this. When I started in the City they were ALL americans. We had merchant bankers, something quite different but it wan't long before they too became bankers of investment. Now these chaps found businesses, financed them for flotations (IPO's), provided real capital to the economies and were pretty popular people when they allocated good lines of stock at decent premiums till the late 1990's. And then they got greedy. They worked closely with hedge funds, giving them the meat from the pies, started going synthetic derivative based (for another day), took huge risks with their balance sheets, took zero liability for their failures and yet ensured outrageous bonus and pension schemes ultimately getting the people to pay for this through QE (another questionable enterprise).
The masters of the new universe are Goldman Sachs. They are everywhere and yet nowhere. Technocats with GS credentials can be found at the Federal Reserve, also in Italy and Greece, but look more closely they are everywhere and yet nowhere. The hypocrisy of investment banks and their dismantling of businesses is truly astonishing but it's called 'good' business, allowing for global stability. Greece and Italy and other nations in/outside EU have been victims of GS trade strategies (I should say that JPMorgan, Citigroup, MorganStanley do just the same amount of damage or thereabouts).
So I wondered who Osborne was going to name.......I choked at this point. A nice smooth chap with a crooked tie called Carney, a nice chap with Goldman Sachs credentials. Bloody marvellous and just to prove that DaveCam's hypocrisy knows no bounds the chap isn't even a Brit. He's Canadian so that's all right then. Let's all mount up and give him the red carpet.
But I do suspect that there were a few British bankers spluttering on their cigars at this juncture. Good old David Tomlinson from Mary Poppins Mr Carney is NOT.
Thanks for the opportunity Mr DaveCam!
ps One would think that with our education system someone else from Oxbridge (other than Carney) or even Eton or St Paul's might have been offered the job. Anyway my friend Fintag has met Carney and says he's a nice fellow so that's that then. Good luck Carney.....
Sunday 21 October 2012
Red Tape RED OCTOBER
I've been a vocal opponent of ALL forms of regulation for some years now as readers of this blog know too well. Not only that I am against ALL forms of reconditioning of the workforce. By that I mean this current epidemic of forcing people to go back to school to learn futile facts and figures that have questionable bearing on the abilities of free thinking individuals and wont improve their chances in the work environment.
In my own household my partner (who is half Armenian and half Russian) and I have both experienced this absurdity recently. She is a regulated (ahhhhhh!!!) translator and interpreter with the UK Justice System and registered in Russian/English and presumably English/Russian too although she speaks 5 languages in total. The insistence by her trade body (?) that she take more exams to learn/re-learn/regurgitate her Russian/English is puzzling to say the least especially as she keeps being offered to do work by the UK Courts/Police/others in English/Armenian. One would assume quite innocently perhaps that the people running the trade bodies/agencies might actually read their computer screens. In her case she's taken countless exams already and passed them all with distinction.
I'm not so lucky though. I'm one of those (few) people who fit into the "educated but **** at exams slot" that society today doesn't cater for. I think I have one A-level at a well known English Public School. Interestingly my son, now studying for a degree in History at a top 20 University (one that wasn't once a Poly), got countless O levels mostly A*'s, got 3 A levels two of which were A*'s, took an S level or whatever the modern equivalent is (another great Pass), often says to me..."how do you know these things Dad?" as if he's challenging an OxBridge Professor. He went to the same PS for his O's and crossed the road to the Grammar for his his A's. How is it that he's so good at exams along with millions of other brainy kids who all seem to have similar achievements? I'm sorry but I'm part of that small brigade who really do believe that society is less professional, less knowledgable despite these qualifications and access to easy information c/o the internet.
My partner came back from Moscow the other day with a copy of "The Moscow Times", an english newspaper. Are there any Russian papers in London other than The Standard (note my brother use to go out yonks ago with the current editor I recollect, lucky chap)? I doubt it. Anyway I was struck by a headline "Medvedev Wants Less Red Tape". As you can imagine this was music to my ears so I read it.
Here are the core bits and pieces;-
Medvedev said "..that federal regional government agencies shouldn't demand any more paperwork from investors than existing rules call for". At this point I fell off my chair. I like this fellow Medvedev. I'm now going to refer to him as Dmitry from now on as I feel I may be on first name terms with him very soon.
Dmitry goes on to say. " It is necessary to state the principle that they can't require documents that haven't been directly stipulated." This is weird! . I said this to a lawyer, stockbroker and incorporation agency here in the Wild West just the other day. I was told in no uncertain terms to 'shut it' and fill in more forms. Referring to travel requirements this is what Dmitry then said. "There are a number of states inside the EU that block free travel" I had NO idea that this is happening. FREE TRADE was extinguished in EU long ago but now apparently it's FREE TRAVEL that is prohibited. Dmitry commented. "I think it's unfair and short-sighted". Give Dmitry a Knighthood! If Bob Geldof can get one for Live Aid, the EU can receive a Nobel Peace Prize for organizing riots in Athens and Madrid then surely Dmitry can have a Knighthood for COMMON SENSE. Unfortunately he ruined his chance by then saying. "Progress had been made in visa relations with the United States (of America) but it wasn't obvious as we would like it to be". Yup, even Dmitry knows that the USA is the new Soviet Union. Unfortunately the UK is just a muppet state to Washington and HM was informed some time ago not to put his name forward alongside Mr Angry from Enterprise Britain.
My ex-friend DaveCam was seen pontificating at the recent Tory Conference. He said nothing of any note but did suggest that UK was suffering from "suffocating bureaucracy". Well DaveCam I've got news for you. The plastic bag was placed over my head some years ago and I suffocated in June this year due to fascist principles supplied by the UK regulator.
Now everyone should get ready for school! Don't forget your pencils children.
In my own household my partner (who is half Armenian and half Russian) and I have both experienced this absurdity recently. She is a regulated (ahhhhhh!!!) translator and interpreter with the UK Justice System and registered in Russian/English and presumably English/Russian too although she speaks 5 languages in total. The insistence by her trade body (?) that she take more exams to learn/re-learn/regurgitate her Russian/English is puzzling to say the least especially as she keeps being offered to do work by the UK Courts/Police/others in English/Armenian. One would assume quite innocently perhaps that the people running the trade bodies/agencies might actually read their computer screens. In her case she's taken countless exams already and passed them all with distinction.
I'm not so lucky though. I'm one of those (few) people who fit into the "educated but **** at exams slot" that society today doesn't cater for. I think I have one A-level at a well known English Public School. Interestingly my son, now studying for a degree in History at a top 20 University (one that wasn't once a Poly), got countless O levels mostly A*'s, got 3 A levels two of which were A*'s, took an S level or whatever the modern equivalent is (another great Pass), often says to me..."how do you know these things Dad?" as if he's challenging an OxBridge Professor. He went to the same PS for his O's and crossed the road to the Grammar for his his A's. How is it that he's so good at exams along with millions of other brainy kids who all seem to have similar achievements? I'm sorry but I'm part of that small brigade who really do believe that society is less professional, less knowledgable despite these qualifications and access to easy information c/o the internet.
My partner came back from Moscow the other day with a copy of "The Moscow Times", an english newspaper. Are there any Russian papers in London other than The Standard (note my brother use to go out yonks ago with the current editor I recollect, lucky chap)? I doubt it. Anyway I was struck by a headline "Medvedev Wants Less Red Tape". As you can imagine this was music to my ears so I read it.
Here are the core bits and pieces;-
Medvedev said "..that federal regional government agencies shouldn't demand any more paperwork from investors than existing rules call for". At this point I fell off my chair. I like this fellow Medvedev. I'm now going to refer to him as Dmitry from now on as I feel I may be on first name terms with him very soon.
Dmitry goes on to say. " It is necessary to state the principle that they can't require documents that haven't been directly stipulated." This is weird! . I said this to a lawyer, stockbroker and incorporation agency here in the Wild West just the other day. I was told in no uncertain terms to 'shut it' and fill in more forms. Referring to travel requirements this is what Dmitry then said. "There are a number of states inside the EU that block free travel" I had NO idea that this is happening. FREE TRADE was extinguished in EU long ago but now apparently it's FREE TRAVEL that is prohibited. Dmitry commented. "I think it's unfair and short-sighted". Give Dmitry a Knighthood! If Bob Geldof can get one for Live Aid, the EU can receive a Nobel Peace Prize for organizing riots in Athens and Madrid then surely Dmitry can have a Knighthood for COMMON SENSE. Unfortunately he ruined his chance by then saying. "Progress had been made in visa relations with the United States (of America) but it wasn't obvious as we would like it to be". Yup, even Dmitry knows that the USA is the new Soviet Union. Unfortunately the UK is just a muppet state to Washington and HM was informed some time ago not to put his name forward alongside Mr Angry from Enterprise Britain.
My ex-friend DaveCam was seen pontificating at the recent Tory Conference. He said nothing of any note but did suggest that UK was suffering from "suffocating bureaucracy". Well DaveCam I've got news for you. The plastic bag was placed over my head some years ago and I suffocated in June this year due to fascist principles supplied by the UK regulator.
Now everyone should get ready for school! Don't forget your pencils children.
Friday 19 October 2012
Black Monday -25th Anniversary
Where were you on BLACK MONDAY?
I've been asked this a few times over the years and since CNBC is doing a bulletin on it today here is my recollection.
Actually the problems started in the weeks prior to 19th October 1987. Many people had borrowed money on rolled over trading positions since the hectic summer where £millions were made (& lost). Many market strategists including the high profile strategist at Dean Witter Reynolds (now Morgan Stanley), John Mendelsohn had warned of the effects of 'programme trading' many times on US tv, etc. No-one listened.
Friday 16th October, however, provided a different slant on capital markets activity.
My father and I were with a small London brokerage at the time, Dunkley Marshall. There were around 40 brokers and dealers and another 30 support staff. On Friday morning the Great Storm hit the south eastern parts of England. I had left my house at around 7am for the 1 hour journey. The station was deserted like many. I scampered back to my house zig-zagging fallen trees and rang the office. A friend of mine, Richard Coles, a young dynamic broker (now living happily in Oz) surprisingly answered the phone. There were around half a dozen personnel in the office including my father who had walked from the Barbican. Coles told me it was like working in hell. It was impossible to answer the telephones around the dealing room with virtually no-one about so he had taken responsibility by operating the dealing room from the confines of the reception desk where normally young girls had transferred calls into the open plan area. By delegating price and dealing tasks to the floor and eslewhere he was just about handling the 'incoming' as the marines would say.
Monday morning was a whole new saga though. I had arrived at my desk around 7.45am despite difficult trains following the weekend when I had had to chop a few trees. Clients were phoning in at an alarming rate and the Mainwaring phrase "don't panic" resounded around the office. I remember clearly one partner sitting opposite shouting at a client after receiving an earful of abuse and concern..."well, you think you've got ****ing problems, I've just bought a farm and had to contend with 500 fallen oak trees at the weekend, now stop wasting my time". Or words to that effect! Anyway it wasn't the first phone that got slammed that day.
The stock exchange electronic pricing system wasn't 'real time' and throughout the day the only real picture the majority of us got were regular updates from our dealers. With the gyrations on FTSE100 of huge %'s (I think the day swing was around 40% although top to bottom around -23%) it didn't take me long to work out that on a 20 minute screen delay the blue prices were probably red whilst within minutes the red were probably blue. A few trading clients took my advice at the time so I suggested a few buy trades at blue and did the same later in the morning. I can say with 100% conviction it was the only time that I've ever seen profits made at the high point as dealers were often shovelling trades at sometimes £'s lower. Of course, alot of discretion have to be allowed and not many tried this dangerous strategy. The best advice was to do nothing and mercifully many took that on board. I do remember though that an institutional client's boss panicked at around 11am (my contact was in Bermuda on holiday) and sold millions of Attwoods through me at the wrong price; by the time my contact returned on wednesday Attwoods had rallied like most stocks.
By the time Wall Street had opened most in London had prepared themselves for a rocky afternoon. The lessons of the morning had stood us in good stead though.
Somehow we got through the day.
The next day was "Terrible Tuesday". The firms credit control departments were on prozac and the Finance Partner and Settlements Manager tried to come to terms with the carnage. Stock delivery was a serious problem for every firm across the LSE ( and had been for weeks prior to the crash) but I don't recollect any proper firms getting into too much undue stress.
Most investors had stood their ground and as we all now know October '87 was really just a great correction rather than a descending crash like '29 or what we went through more recently with Lehman's.
I've been asked this a few times over the years and since CNBC is doing a bulletin on it today here is my recollection.
Actually the problems started in the weeks prior to 19th October 1987. Many people had borrowed money on rolled over trading positions since the hectic summer where £millions were made (& lost). Many market strategists including the high profile strategist at Dean Witter Reynolds (now Morgan Stanley), John Mendelsohn had warned of the effects of 'programme trading' many times on US tv, etc. No-one listened.
Friday 16th October, however, provided a different slant on capital markets activity.
My father and I were with a small London brokerage at the time, Dunkley Marshall. There were around 40 brokers and dealers and another 30 support staff. On Friday morning the Great Storm hit the south eastern parts of England. I had left my house at around 7am for the 1 hour journey. The station was deserted like many. I scampered back to my house zig-zagging fallen trees and rang the office. A friend of mine, Richard Coles, a young dynamic broker (now living happily in Oz) surprisingly answered the phone. There were around half a dozen personnel in the office including my father who had walked from the Barbican. Coles told me it was like working in hell. It was impossible to answer the telephones around the dealing room with virtually no-one about so he had taken responsibility by operating the dealing room from the confines of the reception desk where normally young girls had transferred calls into the open plan area. By delegating price and dealing tasks to the floor and eslewhere he was just about handling the 'incoming' as the marines would say.
Monday morning was a whole new saga though. I had arrived at my desk around 7.45am despite difficult trains following the weekend when I had had to chop a few trees. Clients were phoning in at an alarming rate and the Mainwaring phrase "don't panic" resounded around the office. I remember clearly one partner sitting opposite shouting at a client after receiving an earful of abuse and concern..."well, you think you've got ****ing problems, I've just bought a farm and had to contend with 500 fallen oak trees at the weekend, now stop wasting my time". Or words to that effect! Anyway it wasn't the first phone that got slammed that day.
The stock exchange electronic pricing system wasn't 'real time' and throughout the day the only real picture the majority of us got were regular updates from our dealers. With the gyrations on FTSE100 of huge %'s (I think the day swing was around 40% although top to bottom around -23%) it didn't take me long to work out that on a 20 minute screen delay the blue prices were probably red whilst within minutes the red were probably blue. A few trading clients took my advice at the time so I suggested a few buy trades at blue and did the same later in the morning. I can say with 100% conviction it was the only time that I've ever seen profits made at the high point as dealers were often shovelling trades at sometimes £'s lower. Of course, alot of discretion have to be allowed and not many tried this dangerous strategy. The best advice was to do nothing and mercifully many took that on board. I do remember though that an institutional client's boss panicked at around 11am (my contact was in Bermuda on holiday) and sold millions of Attwoods through me at the wrong price; by the time my contact returned on wednesday Attwoods had rallied like most stocks.
By the time Wall Street had opened most in London had prepared themselves for a rocky afternoon. The lessons of the morning had stood us in good stead though.
Somehow we got through the day.
The next day was "Terrible Tuesday". The firms credit control departments were on prozac and the Finance Partner and Settlements Manager tried to come to terms with the carnage. Stock delivery was a serious problem for every firm across the LSE ( and had been for weeks prior to the crash) but I don't recollect any proper firms getting into too much undue stress.
Most investors had stood their ground and as we all now know October '87 was really just a great correction rather than a descending crash like '29 or what we went through more recently with Lehman's.
Friday 28 September 2012
We are near the APEX of the crisis, much nearer to it than millions think
The global financial, economic and social crisis is nearly at its apex point.
Apex (Latin for top, peak, summit)
How do I know this? Well, I work largely on a combination of fact and feel. This is called a HUNCH (an intuition or feeling). It's something that regulators can't stomach and is never found in an analysts report.
There have been a lot of discussions recently regarding the fickleness (**) of fiat currencies as the US deficit reached US$16 trillion. Over the last 40 years the US$ has lost around 80% of its purchasing power and with QE and other Bernanke induced liquidity injections I suspect further dilution of buying power will result. Just in the last few days good ol' Ben has promised to inject $40 billion per month; he'll do "whatever it takes" to kick start the US economy.
(**) --inconstancy, volatility, unpredictability, unfaithfulness, capriciousness, mutability, unsteadiness, flightiness, fitfulness the fickleness of businessmen and politicians
We've heard this phrase before. In the last few months the same phrase has been used by the ECB's Mario Draghi. He said -"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," Draghi told the audience in Lancaster House, a grand building in central London, then paused for effect. "And believe me, it will be enough."
When I hear this phrase I have a bad feeling, always. History has taught us this.
Example - In September 1942 the following event occurred;- Adolf Hitler ordered (General) Paulus to take Stalingrad whatever the cost to German forces. On the radio Hitler told the German people: "You may rest assured that nobody will ever drive us out of Stalingrad."
Well, I think the Russian people and its armies had different ideas at the time and we all know how Stalingrad ended. (I'd recommend anyone to visit Volgograd today, it's a dynamic City with an extraordinary monument to those who defended it).
Fast forward to the European Union and the great experiment that hardly anyone I speak to really wants. The EU has gone well beyond its original remit and has clearly mismanaged the economies, the currency itself as well as just about every facet that it encompasses. New model regulation is a disaster and as far as the UK is concerned the FSA (soon to hydrate into FCA and others) has allowed absurd and unworkable doctrine to pass unhindered through the back door. Economies are contracting as predicted by me at an alarming pace and GDP targetting is continuing through lower interests rates and ultimately inflationary tap turning. Markets everywhere are now disfunctioning and the confusion amongst institutions and new age Wealth (always depreciating it seems) managers is alarming too as new suitability rules seem to follow government guidelines. Just about everyone working for the european vision is earning premium salaries with similar attractive pensions and perks. The people are angry everywhere but so far are giving governments the benefit of doubts. However, Greece is in a no win no win situation and has to DEFAULT to move forward. The authorities there have managed to keep a lid on the tensions so far but it is only a matter of time. Similarly Spain is in the doldrums too and recent street protests have been pretty ugly. I expect things to get a lot worse and the crisis of trust to spread to other Club Med countries. In Italy the consensus view is that the technocrat PM Mario Monti is already assured of a new term. Who said that Italy is a democracy? Portugal has been pretty quiet but if Spain kicks off as I predict then social and markets panic could catalyse. It's now becoming clear that Germany may well get left with a northern EuroZone and a rebranded Euro. I'm not sure where France is headed but the people are speaking of a return to a New Franc. So there we have it. Banks in the EuroZone are on the verge of epidemic runs (see previous post on Spanish banks) and it's only a matter of time before the cracks widen. IT WILL GET VERY UGLY INDEED. My view is that global markets could panic by as much as 30-50% and in bond markets yields across EU could exceed 20-30%. I'm sorry but I do think there is a monumental catastrophe around the corner.
So what do do?
It's pretty clear that the fiat currencies are going to crumble hereon. I was advocating a minimum weighting in gold and gold equities of 25% till June when I left over-regulated capital markets .
My new (unregulated and personal) adjusted weightings (my ideal personal portfolio) are as follows;-
GOLD (physical krugerrands and small bars) 25% (as high as 50%)
GOLD EQUITIES (mostly North American and African) 25%
New Capital Wealthy Nations Fund ( a fund focused on true CREDIT nations bonds) 25%
A GLOBAL AGRI FUND (still looking for a suitable vehicle) 10%
THE REST 15% (as high as 35%) -- (spread it around in liquid assets, maybe certain blue chip equities, emerging & frontiers markets funds, art, etc but it really is a lottery right now)
---%'s to be adjusted to suit
DO NOT HOLD ANY FIXED INTEREST INSTRUMENTS, EUROS & DERIVATIVES (incl ETF's) & MOST IMPORTANTLY REVIEW ANY CASH DEPOSITS WITH BUILDING SOCIETIES & BANKS. HOLD TIGHT FOR A UK PROPERTY CORRECTION OF UP TO 70% IN PLACES.
The financial system is now geared to take your money. Get wise to the events that may unfold at any moment.
NONE OF THE ABOVE COMMENTS ARE DEEMED TO BE 'ADVICE'. THESE ARE SOLELY EXPRESSIONS, OPINIONS AND COMMENTS BASED ON WHAT I HAVE SEEN UNFOLD THE LAST 36 YEARS AND ESPECIALLY SINCE GREENSPAN WENT WILD IN 1995* WITH AN INTEREST RATE INDUCED ECONOMY DESIGNED TO INFLATE ASSET PRICES AND EXPAND CREDIT.
* --On February 23, 1995 then-Fed chairman Alan Greenspan, in his semi-annual Humphrey-Hawkins Act testimony to Congress, announced that he was ending his period of money tightening that had taken the federal funds rate up to 6% and would start letting rates decline.
Apex (Latin for top, peak, summit)
How do I know this? Well, I work largely on a combination of fact and feel. This is called a HUNCH (an intuition or feeling). It's something that regulators can't stomach and is never found in an analysts report.
There have been a lot of discussions recently regarding the fickleness (**) of fiat currencies as the US deficit reached US$16 trillion. Over the last 40 years the US$ has lost around 80% of its purchasing power and with QE and other Bernanke induced liquidity injections I suspect further dilution of buying power will result. Just in the last few days good ol' Ben has promised to inject $40 billion per month; he'll do "whatever it takes" to kick start the US economy.
(**) --inconstancy, volatility, unpredictability, unfaithfulness, capriciousness, mutability, unsteadiness, flightiness, fitfulness the fickleness of businessmen and politicians
We've heard this phrase before. In the last few months the same phrase has been used by the ECB's Mario Draghi. He said -"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," Draghi told the audience in Lancaster House, a grand building in central London, then paused for effect. "And believe me, it will be enough."
When I hear this phrase I have a bad feeling, always. History has taught us this.
Example - In September 1942 the following event occurred;- Adolf Hitler ordered (General) Paulus to take Stalingrad whatever the cost to German forces. On the radio Hitler told the German people: "You may rest assured that nobody will ever drive us out of Stalingrad."
Well, I think the Russian people and its armies had different ideas at the time and we all know how Stalingrad ended. (I'd recommend anyone to visit Volgograd today, it's a dynamic City with an extraordinary monument to those who defended it).
Fast forward to the European Union and the great experiment that hardly anyone I speak to really wants. The EU has gone well beyond its original remit and has clearly mismanaged the economies, the currency itself as well as just about every facet that it encompasses. New model regulation is a disaster and as far as the UK is concerned the FSA (soon to hydrate into FCA and others) has allowed absurd and unworkable doctrine to pass unhindered through the back door. Economies are contracting as predicted by me at an alarming pace and GDP targetting is continuing through lower interests rates and ultimately inflationary tap turning. Markets everywhere are now disfunctioning and the confusion amongst institutions and new age Wealth (always depreciating it seems) managers is alarming too as new suitability rules seem to follow government guidelines. Just about everyone working for the european vision is earning premium salaries with similar attractive pensions and perks. The people are angry everywhere but so far are giving governments the benefit of doubts. However, Greece is in a no win no win situation and has to DEFAULT to move forward. The authorities there have managed to keep a lid on the tensions so far but it is only a matter of time. Similarly Spain is in the doldrums too and recent street protests have been pretty ugly. I expect things to get a lot worse and the crisis of trust to spread to other Club Med countries. In Italy the consensus view is that the technocrat PM Mario Monti is already assured of a new term. Who said that Italy is a democracy? Portugal has been pretty quiet but if Spain kicks off as I predict then social and markets panic could catalyse. It's now becoming clear that Germany may well get left with a northern EuroZone and a rebranded Euro. I'm not sure where France is headed but the people are speaking of a return to a New Franc. So there we have it. Banks in the EuroZone are on the verge of epidemic runs (see previous post on Spanish banks) and it's only a matter of time before the cracks widen. IT WILL GET VERY UGLY INDEED. My view is that global markets could panic by as much as 30-50% and in bond markets yields across EU could exceed 20-30%. I'm sorry but I do think there is a monumental catastrophe around the corner.
So what do do?
It's pretty clear that the fiat currencies are going to crumble hereon. I was advocating a minimum weighting in gold and gold equities of 25% till June when I left over-regulated capital markets .
My new (unregulated and personal) adjusted weightings (my ideal personal portfolio) are as follows;-
GOLD (physical krugerrands and small bars) 25% (as high as 50%)
GOLD EQUITIES (mostly North American and African) 25%
New Capital Wealthy Nations Fund ( a fund focused on true CREDIT nations bonds) 25%
A GLOBAL AGRI FUND (still looking for a suitable vehicle) 10%
THE REST 15% (as high as 35%) -- (spread it around in liquid assets, maybe certain blue chip equities, emerging & frontiers markets funds, art, etc but it really is a lottery right now)
---%'s to be adjusted to suit
DO NOT HOLD ANY FIXED INTEREST INSTRUMENTS, EUROS & DERIVATIVES (incl ETF's) & MOST IMPORTANTLY REVIEW ANY CASH DEPOSITS WITH BUILDING SOCIETIES & BANKS. HOLD TIGHT FOR A UK PROPERTY CORRECTION OF UP TO 70% IN PLACES.
The financial system is now geared to take your money. Get wise to the events that may unfold at any moment.
NONE OF THE ABOVE COMMENTS ARE DEEMED TO BE 'ADVICE'. THESE ARE SOLELY EXPRESSIONS, OPINIONS AND COMMENTS BASED ON WHAT I HAVE SEEN UNFOLD THE LAST 36 YEARS AND ESPECIALLY SINCE GREENSPAN WENT WILD IN 1995* WITH AN INTEREST RATE INDUCED ECONOMY DESIGNED TO INFLATE ASSET PRICES AND EXPAND CREDIT.
* --On February 23, 1995 then-Fed chairman Alan Greenspan, in his semi-annual Humphrey-Hawkins Act testimony to Congress, announced that he was ending his period of money tightening that had taken the federal funds rate up to 6% and would start letting rates decline.
Wednesday 29 August 2012
Crash Alert! Where's all the cash gone?
Spain is undergoing a massive run on its banks and hardly anyone has noticed. This is what has been reported by the welliegraph;-
Spain has suffered the worst haemorrhaging of bank deposits since the launch of the euro, losing funds equal to 7% of GDP in a single month. Data from the European Central Bank shows that outflows from Spanish commercial banks reached Euros74bn (£59bn) in July, twice the previous monthly record. This brings the total deposit loss over the past year to 10.9%, replicating the pattern seen in Greece as the crisis spread. The Bank of Spain said the fall is distorted by the July effect of tax payments and by the expiry of securitised funds. On the other hand, Julian Callow from Barclays Capital said the deposit loss is 65bn even when adjusted for the season....Deposit outflows are clearly picking up and the balance sheet of the Spanish banking system is contracting.
***SO WHERE'S ALL THE CASH GOING?***
So then, hard cash is rapidly disappearing from the spanish banking system but consumers and businesses aren't spending. So what is happening to all the hard cash? I don't believe that anyone is seriously putting it 'sous leur lits' as the french would say. If history is anything to go by there could well be a run on prams in Spain as millions replace firewood with euro banknotes once the inevitable hyper-inflation finally happens ( a few years down the road). In the short-term there's little evidence that spaniards might be a. buying government bonds b. buying spanish equities c. buying any other sovereign debt d. investing abroad e. buying Gold f. buying agriculture, agri-foods, normal food g. buying art h. buying property (from the Brits?) ......shall I go on? Perhaps there's a massive pay down of debt occurring. The destination of all these euros is rather curious though. Maybe there's a similar thing happening as to when Greece (2 years ago) ran into difficulties; the herd back then sent 100's of millions of euros abroad (Suisse banks) and many bought into London property at drastically high levels. And then of course there are the spanish footballers; I understand their contracts are now being traded as debt too. Maybe there are a few spanish towns buying footballers debt but I doubt their degree of sophistication.
I anyone has any insights on this I'd love to know what is really happening in Spain. One thing is certain though is that things are beginning to look as though it may get very ugly in Club Med (Spain, Italy, Greece, Portugal) before long.
Stand by for a substantial equity and bond re-rating. Ostensibly a 1987 style crash that may make the 23% daily correction back then look like a walk on a Costa Brava beach.
Sell EUROS Buy GOLD (the new global currency).
Spain has suffered the worst haemorrhaging of bank deposits since the launch of the euro, losing funds equal to 7% of GDP in a single month. Data from the European Central Bank shows that outflows from Spanish commercial banks reached Euros74bn (£59bn) in July, twice the previous monthly record. This brings the total deposit loss over the past year to 10.9%, replicating the pattern seen in Greece as the crisis spread. The Bank of Spain said the fall is distorted by the July effect of tax payments and by the expiry of securitised funds. On the other hand, Julian Callow from Barclays Capital said the deposit loss is 65bn even when adjusted for the season....Deposit outflows are clearly picking up and the balance sheet of the Spanish banking system is contracting.
***SO WHERE'S ALL THE CASH GOING?***
So then, hard cash is rapidly disappearing from the spanish banking system but consumers and businesses aren't spending. So what is happening to all the hard cash? I don't believe that anyone is seriously putting it 'sous leur lits' as the french would say. If history is anything to go by there could well be a run on prams in Spain as millions replace firewood with euro banknotes once the inevitable hyper-inflation finally happens ( a few years down the road). In the short-term there's little evidence that spaniards might be a. buying government bonds b. buying spanish equities c. buying any other sovereign debt d. investing abroad e. buying Gold f. buying agriculture, agri-foods, normal food g. buying art h. buying property (from the Brits?) ......shall I go on? Perhaps there's a massive pay down of debt occurring. The destination of all these euros is rather curious though. Maybe there's a similar thing happening as to when Greece (2 years ago) ran into difficulties; the herd back then sent 100's of millions of euros abroad (Suisse banks) and many bought into London property at drastically high levels. And then of course there are the spanish footballers; I understand their contracts are now being traded as debt too. Maybe there are a few spanish towns buying footballers debt but I doubt their degree of sophistication.
I anyone has any insights on this I'd love to know what is really happening in Spain. One thing is certain though is that things are beginning to look as though it may get very ugly in Club Med (Spain, Italy, Greece, Portugal) before long.
Stand by for a substantial equity and bond re-rating. Ostensibly a 1987 style crash that may make the 23% daily correction back then look like a walk on a Costa Brava beach.
Sell EUROS Buy GOLD (the new global currency).
Friday 24 August 2012
I think I know how Lance Armstrong feels
I'm sure many of us have been somewhat amazed by revelations that Lance Armstrong was and is (allegedly) a drug cheat. But is it as simple as the media suggest?
It does seem incredible that any sportsman can achieve such extraordinary status and yet years after his last great success be on the receiving end of a witch hunt addressing concerns that he systemically cheated the sport that he had dedicated his life to. But is the situation that Lance Armstrong has found himself in an isolated incident or is it symptomatic of a society that now tests, overtests, examines, regulates, spins just about everything in the name of upholding integrity? The financial services industry that I was part of from March 1976 to June 2012 has and still is undergoing a witch hunt and it's incredible to think that '000s like myself are being forced out. Of course the reasons are very different on the surface. There is no accusation of drug abuse within the anti-RDR lobby. Lance Armstrong is NOT being told to go back to school to learn to ride a bike. Yet the results are exactly the same. Just like Lance (we're not on first name terms yet) my reaction is the same.
"I can't really be bothered dealing with the regulators and do gooders who have achieved very little and yet lord over us like vultures!"
Lord Turner is a hypocrite just like the people who are turning en masse on Armstrong. Nothing good can be achieved by all of this excessive intrusion and yet it's happening to '000s of people globally. One doesn't have to feel sympathy for L A. I doubt he wants anyone's sympathy anyway. Like him I worked and cycled my way through Capital Markets for many years. He did the mileage whereas I did the trades. He took the drug tests (presumably the Tour regulators took blood samples too) whereas I remained compliant. In both cases nothing was found to lead anyone to assume or presume any form of abuse was taking place. L A had already suffered at the hands of testicular cancer and presumably taken shed loads of drugs to combat this and yet he still managed to respond to sports regulators probing him. He was clean then and yet we're now being told he wasn't. The similarities here with the way that '000s of IFA's and Stockbrokers are being treated are somewhat obtuse but there is something rather sinister in all of this. Why are millions of people globally being so gullible regarding the benefits of any form of regulation? I'm convinced REGULATION & REGULATORS everywhere are the real enemy. I wish that the media would redress the imbalance on this kind of reporting but like many I'm suspicious as to who is controlling them.
Walking away from this intrusion and orwellian discrimination and holding one's head up high just shows that there are men out there who have woken up to this hypocrisy.
I'm just off to the shed to fix my bike!
It does seem incredible that any sportsman can achieve such extraordinary status and yet years after his last great success be on the receiving end of a witch hunt addressing concerns that he systemically cheated the sport that he had dedicated his life to. But is the situation that Lance Armstrong has found himself in an isolated incident or is it symptomatic of a society that now tests, overtests, examines, regulates, spins just about everything in the name of upholding integrity? The financial services industry that I was part of from March 1976 to June 2012 has and still is undergoing a witch hunt and it's incredible to think that '000s like myself are being forced out. Of course the reasons are very different on the surface. There is no accusation of drug abuse within the anti-RDR lobby. Lance Armstrong is NOT being told to go back to school to learn to ride a bike. Yet the results are exactly the same. Just like Lance (we're not on first name terms yet) my reaction is the same.
"I can't really be bothered dealing with the regulators and do gooders who have achieved very little and yet lord over us like vultures!"
Lord Turner is a hypocrite just like the people who are turning en masse on Armstrong. Nothing good can be achieved by all of this excessive intrusion and yet it's happening to '000s of people globally. One doesn't have to feel sympathy for L A. I doubt he wants anyone's sympathy anyway. Like him I worked and cycled my way through Capital Markets for many years. He did the mileage whereas I did the trades. He took the drug tests (presumably the Tour regulators took blood samples too) whereas I remained compliant. In both cases nothing was found to lead anyone to assume or presume any form of abuse was taking place. L A had already suffered at the hands of testicular cancer and presumably taken shed loads of drugs to combat this and yet he still managed to respond to sports regulators probing him. He was clean then and yet we're now being told he wasn't. The similarities here with the way that '000s of IFA's and Stockbrokers are being treated are somewhat obtuse but there is something rather sinister in all of this. Why are millions of people globally being so gullible regarding the benefits of any form of regulation? I'm convinced REGULATION & REGULATORS everywhere are the real enemy. I wish that the media would redress the imbalance on this kind of reporting but like many I'm suspicious as to who is controlling them.
Walking away from this intrusion and orwellian discrimination and holding one's head up high just shows that there are men out there who have woken up to this hypocrisy.
I'm just off to the shed to fix my bike!
Tuesday 21 August 2012
Shakedown Shakedown!
I've been pretty quiet over the summer as temperature in Europe dance in the high 30s but the current topic "Shakedown Shakedown" has got me thinking during some of the hot nights. My friend over in Virgina USA has reminded me that in US of A the government (the Fed et al) are pretty well acting like Al Capone in more ways than one. He calls it a classic 'Shakedown'. I've met many good brokers,fund managers, hedge fund managers over the years but there are only a few that I would classify (re-classify) as 'guru' material but my friend in Virginia is one of them. He had worked till relatively recently on Wall Street both in NY and London and his knowledge, experience and valuable insights are something I take very seriously. We don't always agree on everything but one thing that we do agree on is that there are 'Shakedowns' occurring and not just in USA.
Several years ago a UK listed company 'H' that I invested in on behalf of clients saw the writing on the wall in Sub-Saharan Africa and did a clever deal with a FTSE100 constituent 'T' allowing for a special dividend to get paid. After completing the deal the African nation retrospectively charged the PLC with tax evasion (some $400m +) which clearly the company wasn't prepared to pay (& rightly so). Having taken legal advice the London based int'l courts covered the case and after a while the UK PLC 'H' put the sum into an escrow. The money is still there as far as I know and now the African nation is making life more difficult for 'T' too. SHAKEDOWN 1.
The BP oil spill in Gulf of Mexico has been well documented but hardly any journalists have questioned as to why the int'l board of BP allotted billions of shareholders funds to a US lawyer representing the US government. To date most of the allotted funds have yet to be distributed as perceived environmental and business losses were overcooked by a severe margin. It'll be interesting to see if the US lawyer returns the funds to BP shareholders but I'm not holding my breath. SHAKEDOWN 2. (Ed's note. Normal procedure would entail insurance claims taking the slack for any accident followed by an investigation and perhaps a fine. The interference by Obama provoked BP into paying out for questionable failures despite adequate US insurance cover)
In the last month my former employer, Standard Chartered PLC, paid a $345m fine to a NY Federal regulator because the bank allegedly dealt with and for Iranians in the US despite strict embargoes. What is strange about Sands predicament is that Chartered Bank have operated in Iran for nigh on a century, created the Irano-British Bank in 1959 (49%) and have been the primary western banking link between Iran and the region, Iran and the rest of the world and Iran and the US during, before and since the Shah was deposed. Thousands of Iranians live in the US today as opponents to the Ayotullahs and yet no-one seems a bit curious to reflect on how these Iranians can a. obtain investment finance from their relatives and b. simultaneously return income and investment returns to their families in Iran presumably abling and assisting pro-US iranian interests. Granted, there may have been a few rotten deals but surely this was factored in when the banking licence was obtained and renewed in NY. SHAKEDOWN 3. (What happens to the fine $? I doubt US tax-payers will see a dime).
The strange curiosity surrounding the last SHAKEDOWN mentioned is that the chief UK regulator, Lord Turner of FSA, was a Non-Exec Director of Standard Chartered (£180,000 salary) till c. 2008. Ironically he was responsible for remunerationa and ethics. Have you taken your Integrity Matters online test (£20) yet Lord Turner? Anyway his fee for a few hours work a month appears to be an Appendix to SHAKEDOWN 3. Lastly, has anyone worked out the obvious conflict of interest here?
It seems that indebted governments everywhere, failed regulators everywhere, are conducting undemocratic and uncapitalistic SHAKEDOWNS on cash rich businesses so expect more of the same.
Let's not forget that 'Shakedowns' are not confined to big business. Has anyone noticed how the same is happening to customers of utilities businesses? More on that later.
"The 21st Century Shakedown is here to stay!!
Several years ago a UK listed company 'H' that I invested in on behalf of clients saw the writing on the wall in Sub-Saharan Africa and did a clever deal with a FTSE100 constituent 'T' allowing for a special dividend to get paid. After completing the deal the African nation retrospectively charged the PLC with tax evasion (some $400m +) which clearly the company wasn't prepared to pay (& rightly so). Having taken legal advice the London based int'l courts covered the case and after a while the UK PLC 'H' put the sum into an escrow. The money is still there as far as I know and now the African nation is making life more difficult for 'T' too. SHAKEDOWN 1.
The BP oil spill in Gulf of Mexico has been well documented but hardly any journalists have questioned as to why the int'l board of BP allotted billions of shareholders funds to a US lawyer representing the US government. To date most of the allotted funds have yet to be distributed as perceived environmental and business losses were overcooked by a severe margin. It'll be interesting to see if the US lawyer returns the funds to BP shareholders but I'm not holding my breath. SHAKEDOWN 2. (Ed's note. Normal procedure would entail insurance claims taking the slack for any accident followed by an investigation and perhaps a fine. The interference by Obama provoked BP into paying out for questionable failures despite adequate US insurance cover)
In the last month my former employer, Standard Chartered PLC, paid a $345m fine to a NY Federal regulator because the bank allegedly dealt with and for Iranians in the US despite strict embargoes. What is strange about Sands predicament is that Chartered Bank have operated in Iran for nigh on a century, created the Irano-British Bank in 1959 (49%) and have been the primary western banking link between Iran and the region, Iran and the rest of the world and Iran and the US during, before and since the Shah was deposed. Thousands of Iranians live in the US today as opponents to the Ayotullahs and yet no-one seems a bit curious to reflect on how these Iranians can a. obtain investment finance from their relatives and b. simultaneously return income and investment returns to their families in Iran presumably abling and assisting pro-US iranian interests. Granted, there may have been a few rotten deals but surely this was factored in when the banking licence was obtained and renewed in NY. SHAKEDOWN 3. (What happens to the fine $? I doubt US tax-payers will see a dime).
The strange curiosity surrounding the last SHAKEDOWN mentioned is that the chief UK regulator, Lord Turner of FSA, was a Non-Exec Director of Standard Chartered (£180,000 salary) till c. 2008. Ironically he was responsible for remunerationa and ethics. Have you taken your Integrity Matters online test (£20) yet Lord Turner? Anyway his fee for a few hours work a month appears to be an Appendix to SHAKEDOWN 3. Lastly, has anyone worked out the obvious conflict of interest here?
It seems that indebted governments everywhere, failed regulators everywhere, are conducting undemocratic and uncapitalistic SHAKEDOWNS on cash rich businesses so expect more of the same.
Let's not forget that 'Shakedowns' are not confined to big business. Has anyone noticed how the same is happening to customers of utilities businesses? More on that later.
"The 21st Century Shakedown is here to stay!!
Friday 29 June 2012
140 Years up in smoke thanks to FSA, my own trade body and the half wits who now run the securities industry
Many of you are probably extremely puzzled about my 'Letter' explaining my 'Exit' from the London Stock Exchange which was sent out this week by the firm that I have been attached to as an Associate these last 7 years.
Today is the last day, barring some miracle, that I am working on the London Stock Exchange and frankly I can't wait until 16:30 hours later today.
I know that I have made the correct decision.
Just in the last hour 3 emails have arrived (alongside the other 70 or so I receive daily) all commenting on important matters of REGULATION. As many who might have read my blog these last few years know full well I believe passionately that my favourite topic, REGULATION is NOT just part of the problem but is in fact THE problem. How do I know this? Well, I had the good fortune to accompany my father one day on to the old floor of the old Stock Exchange in the early 1960's when Hoblyn & King was circling various firms. In those days the brokers spent 100% of their time (when they weren't entertaining in their clubs and local watering holes) dealing on the market, studying stocks & shares (the old terms are always the best) and speaking to their clients who were their life blood. This old way of doing business always put the client first and all aspects of the firms, from the office manager to the the most junior settlements staff as well as the famed tea ladies, all understood that it was their roles to support the brokers in this great adventure. The adventure was indeed a daily buzz as all around everything to do was investment and client driven. I still believe passionately that this should be the case.
The first email was from a colleague wishing me luck for the future and finished by saying that
"I can understand your point of view but you are more than capable of doing these stupid exams, RDR or whatever so why give up if you love the business".
I've lost count of the number of times people have said this to me in the last 18 months. The next 2 emails received today may explain why the "capability" argument is a nonsense. The 1st email is from the iFS School of Finance which used to be the Institute of Bankers in the old days. Just like the LSE it too got hijacked somewhere along the way. This is the thread of the iFS email;-
Dear Mr Hoblyn
Essentials of supervision: helping to prepare your firm for the RDR
Don't forget to book your place at our forthcoming Institute event with Charles Cattell, founding Partner of the Cattellyst Consultancy, which is being held on Tuesday 10 July! Charles is a consultant and training practitioner with extensive expertise across the financial services sector.
This taster workshop will provide an opportunity for those with supervisory responsibilities for advisers under the RDR to explore the nature of those responsibilities, to identify some of the key activities which the role demands of them and to consider how to address some of the challenges they are likely to face.
By the end of the workshop, participants will be:
• aware of the expectations that the firm and the regulator place on them as supervisors
• able to recognise some potentially challenging supervisory situations and be equipped with some pointers and tips for handling them
• able to identify some specific responsibilities for supervisors created by the implementation of the RDR
Has everyone read this as you'll be tested on this subject later? Actually once digested it says absolutely nothing. In fact it is claptrap and reminds me of that course that health & safety officers preach to show decorators and firemen how to climb ladders.
The 3rd email though is my favourite., It comes from Goodacre, a firm that has studied RDR to the nth degree and makes rather a splendid living from the 600 odd pages that the RDR document encompasses. It reads;-
Gap-fill training really needs to be completed in the next couple of months to allow sufficient time to process the necessary registrations. Goodacre has designed specific training courses to fulfill the gaps between CISI qualifications and the new RDR (Retail Distribution Review) standards.
LSE Gap-fill is running over four full-day sessions in London from 09:00-17:00 each day on the following dates:
10th, 17th, 21st & 31st August
A full day session of Securities runs from 09:00-16:00 in London on 6th July
We are also running PCIAM Gap-fill training and Derivatives training on an in-house basis.
CPD Certificates will be issued on completion of the training
In the column attached to the email it proudly states;-
4-day LSE Gap-Fill Training
£992+VAT
Covering the 28 core hours or Financial Services, Regulation & Ethics, Investment Principles & Risk and Personal Taxation.
1-Day Securities Course
£225+VAT
Covering the main topics of The Securities Market, Dealing Principles, Clearing & Settlement
Influences, and Behaviours & Risks.
So there you have it. The RDR is a milking machine for all concerned and the best part of the RDR is that it isn't going to go away. Investors (let's call them clients or customers but I suspect many will think that they're suckers as many brokers and wealth managers will be away from their desks doing all this compliance gap filling alongside a host of other compliance driven courses) are going to end up paying for all this against a backdrop of an ever decreasing standard of service.
Just how am I as a stockbroker in UK supposed to talk to market counterparties, attend market driven meetings (I get invites daily), liaise with 150 clients, deal with settlements issues and at the same time analyse, recommend, buy and sell securities when I'm being dragged away to attend claptrap meetings? I'm afraid 'life is just too short' for all of this.
Next stop.......well has anyone guessed what I'll be doing and where I'll be doing it from in future?
Hasta la vista FSA! And the same to you FCA, having rebranded yourselves. The age of the ninkumpoop is upon us.
ps My exit letter will be published in due course along with more comments of my real life experiences in the age of the fascist compliance regime.
Today is the last day, barring some miracle, that I am working on the London Stock Exchange and frankly I can't wait until 16:30 hours later today.
I know that I have made the correct decision.
Just in the last hour 3 emails have arrived (alongside the other 70 or so I receive daily) all commenting on important matters of REGULATION. As many who might have read my blog these last few years know full well I believe passionately that my favourite topic, REGULATION is NOT just part of the problem but is in fact THE problem. How do I know this? Well, I had the good fortune to accompany my father one day on to the old floor of the old Stock Exchange in the early 1960's when Hoblyn & King was circling various firms. In those days the brokers spent 100% of their time (when they weren't entertaining in their clubs and local watering holes) dealing on the market, studying stocks & shares (the old terms are always the best) and speaking to their clients who were their life blood. This old way of doing business always put the client first and all aspects of the firms, from the office manager to the the most junior settlements staff as well as the famed tea ladies, all understood that it was their roles to support the brokers in this great adventure. The adventure was indeed a daily buzz as all around everything to do was investment and client driven. I still believe passionately that this should be the case.
The first email was from a colleague wishing me luck for the future and finished by saying that
"I can understand your point of view but you are more than capable of doing these stupid exams, RDR or whatever so why give up if you love the business".
I've lost count of the number of times people have said this to me in the last 18 months. The next 2 emails received today may explain why the "capability" argument is a nonsense. The 1st email is from the iFS School of Finance which used to be the Institute of Bankers in the old days. Just like the LSE it too got hijacked somewhere along the way. This is the thread of the iFS email;-
Dear Mr Hoblyn
Essentials of supervision: helping to prepare your firm for the RDR
Don't forget to book your place at our forthcoming Institute event with Charles Cattell, founding Partner of the Cattellyst Consultancy, which is being held on Tuesday 10 July! Charles is a consultant and training practitioner with extensive expertise across the financial services sector.
This taster workshop will provide an opportunity for those with supervisory responsibilities for advisers under the RDR to explore the nature of those responsibilities, to identify some of the key activities which the role demands of them and to consider how to address some of the challenges they are likely to face.
By the end of the workshop, participants will be:
• aware of the expectations that the firm and the regulator place on them as supervisors
• able to recognise some potentially challenging supervisory situations and be equipped with some pointers and tips for handling them
• able to identify some specific responsibilities for supervisors created by the implementation of the RDR
Has everyone read this as you'll be tested on this subject later? Actually once digested it says absolutely nothing. In fact it is claptrap and reminds me of that course that health & safety officers preach to show decorators and firemen how to climb ladders.
The 3rd email though is my favourite., It comes from Goodacre, a firm that has studied RDR to the nth degree and makes rather a splendid living from the 600 odd pages that the RDR document encompasses. It reads;-
Gap-fill training really needs to be completed in the next couple of months to allow sufficient time to process the necessary registrations. Goodacre has designed specific training courses to fulfill the gaps between CISI qualifications and the new RDR (Retail Distribution Review) standards.
LSE Gap-fill is running over four full-day sessions in London from 09:00-17:00 each day on the following dates:
10th, 17th, 21st & 31st August
A full day session of Securities runs from 09:00-16:00 in London on 6th July
We are also running PCIAM Gap-fill training and Derivatives training on an in-house basis.
CPD Certificates will be issued on completion of the training
In the column attached to the email it proudly states;-
4-day LSE Gap-Fill Training
£992+VAT
Covering the 28 core hours or Financial Services, Regulation & Ethics, Investment Principles & Risk and Personal Taxation.
1-Day Securities Course
£225+VAT
Covering the main topics of The Securities Market, Dealing Principles, Clearing & Settlement
Influences, and Behaviours & Risks.
So there you have it. The RDR is a milking machine for all concerned and the best part of the RDR is that it isn't going to go away. Investors (let's call them clients or customers but I suspect many will think that they're suckers as many brokers and wealth managers will be away from their desks doing all this compliance gap filling alongside a host of other compliance driven courses) are going to end up paying for all this against a backdrop of an ever decreasing standard of service.
Just how am I as a stockbroker in UK supposed to talk to market counterparties, attend market driven meetings (I get invites daily), liaise with 150 clients, deal with settlements issues and at the same time analyse, recommend, buy and sell securities when I'm being dragged away to attend claptrap meetings? I'm afraid 'life is just too short' for all of this.
Next stop.......well has anyone guessed what I'll be doing and where I'll be doing it from in future?
Hasta la vista FSA! And the same to you FCA, having rebranded yourselves. The age of the ninkumpoop is upon us.
ps My exit letter will be published in due course along with more comments of my real life experiences in the age of the fascist compliance regime.
Friday 1 June 2012
PGS + PQE = Common Sense
As US 10-year Treasury yields flounder in 1.73% territory, UK 10-year around 1.69%, as ultra high risk euro-sovereigns yield (ex-Greece & Portugal) and trade in the 6-7% universe (Spain c.6.7% Italy c.6%) , as monetarists stand by the taps to turn on the QE printing presses for an umteenth time there is one thing that everyone should be made aware of now. Well, two things actually but who's counting in the scale of incalculable accounting inaccuracies everywhere.
It has been my studied belief for the last decade now that we are entering a period that monetarists and economists everywhere will in years to come call the 'the second coming of the gold standard' but actually I have coined a name for this phase that I think is more appropriate. We're now in the "PGS" era or as I like to call it, "The Pseudo Gold Standard" period. Heck, if that eternal optimist from Goldman Sachs Economics team, Jim O'Neill (he's being lined up for the Bank of England Governorship), can achieve eternal recognition, near immortality for coining the phrase "B R I C" (Brazil Russia India China in case anyone has missed it) then please give ME the credit for "PGS". By the way whilst we're at this game I may as well tell you that my friend Mr Finbar Taggit of http://www.fintag.com/ has already coined the abbreviation "P I I S" which I think takes into account the expected ejection of Greece (or is it a retreat?) from the "P I I G S" fiasco. Please don't take exception to "P I I S". I believe it stands for Portugal, Italy, Ireland and Spain who possibly are next up for a wee spot of bother although with spanish banks currently in the doldrums I think Finbar could have chosen the more chronological "S I I P", "S I P I" or perhaps "S P I I". Anyway he's taken the "P I I S" abbreviation and we must all live with it.
"PGS" for the sake of asking is in fact the blatant recognition from 'credit economies' that they'd prefer to back their currencies with bullion whilst the US, UK and all of the old European powers prefer to trash their currencies and economies through the daft and persistent programs known as QE. Just recently the IMF reported the following gold bullion purchases ;- Philippines (32 tonnes), Sri Lanka (2), Turkey (29), Mexico (3), Kazakhstan (2) and Ukraine (1.4). Can anyone spot the anomaly here? No european super-powers and just Ceylon as the former colony. Or the curiosity? Just why would Turkey buy gold and still want to join the EU.....of boy! It seems the developing world understands basic global economics and sensible sovereign governance better than many of our own central bankers, politicians, economists, etc. I'd expect more of the same here for many years to come as (financial, social and military) stress seems to be the order of the day everywhere.
In reference to the titled equation at the top of this blog just what is "PQE" then? Well, it's something else I've just coined. It's called "Personal Quantative Easing" and it goes like this. If say Mervyn King thinks that future generations of Brits are having their jobs and incomes protected through QE then "PQE" may be a valid alternative for those fed up with QE and the lack of growth equating to job creation, etc. QE as we all know creates electronic money in order to buy gilts (UK gov debt) with the idea of injecting liquidity into the financial markets and eventual economy. It's supposed to catalyse bank lending too but since there wasn't any lending to SME's before the crisis started in 2007 I don't see how we can expect to have a banking system designed to stimulate business when actually it has been profiting from the very same businesses the banking industry is and was designed to support. Pretty well since the late '80s all our commercial banks have traded against us not with us. This has been particularly true ironically of the financial services industry as we all know. That subject is for another day.
So if one has cash and one is concerned about the UK economy what does one do with it? Buying gilts has been and is a pointless exercise. They are all horrendously over-priced and only for the brave bar the odd index-linked variety. With official inflation today at c. 3% (from 5%) and possible real inflation ("pri" oh stop it!) nearer to 10% there is little scope for liquid asset protection. Banks are paying zero to a farthing on deposits and current accounts whilst higher risk building societies challenge the bank rate mechanics by offering HIGH RISK RATES without health warnings to countless unsuspecting depositors. Are these cash packages really protected by FSCS £80,000 threshold? Well, time will tell.
No, the extraordinary observation and opportunity is in "PQE". Whilst tax payers annd ordinary citizens stand by to allow QE there is a market methodology all of its own that is being devised as I speak. Starting with the premise that Gold is cheap and going up (see countless sensible analysts and their arguments for this premise) then it is easy to assume that a bonanza in gold shares will ultimately follow. Meanwhile today one can take very little risk in capital markets by purchasing shares (is the risk really any different to government backed guarantees in an horrendous debt enforced environment?) in some of the large producers at rock bottom prices (p/e's in low single digits). For example (note ALL gross yields before tax) Newmont yields 2.87%, Freeport McMoran 3.86%, Agnico Eagle 2.01%, Barrick Resources 2.00% (on LSE African Barrick yields 3.01%, Petropavlovsk 3.25% and Randgold 0.50% by comparison), GoldCorp 1.43% and there are countless others also paying out dividends on a more favourable basis than bank deposits and with the added bonus of a major pick up in prices in the foreseeable future. Much has been stated about the reason for the pricing anomaly but in essence it would appear that our old adversaries at JP Morgan and Goldman Sachs have been shorting gold shares for several years whilst going LONG the gold ETF market. It's feasible that the hedging will get reversed quite soon with new sovereigns openly buying bullion positions. The IMF and UK are just two powers that have virtually exhausted their gold reserves. I'd expect this to be reversed as the penny is indeed dropping. As an aside Newmont has stated that it's dividend policy will reflect the gold price; so if Gold goes say to $3,000pto the dividend should increase pari passu. It's mind boggling to consider though if Gold goes to the top end forecast of $60,000pto. Who said that Gold is NOT a credible investment (or currency) against a derivatives driven banking and capital markets universe? In addition if one's a bull of the oil price similar attractive yields can be found in oil majors right now. Conoco Phillips yield 4.98%, Royal Dutch Shell 5.11%, Encana 3.84% with a host of others offering returns around 2 x (+) higher than current UK and US 10-year yields. DYOR.
So try a bit of "PQE" if you recognise "PGS", you know it will one day make sense and may well get us all out of a rather large hole.
NOTE THIS BLOG IS NOT DEEMED TO BE AN INVESTMENT RECOMMENDATION FOR ANY COMMODITIES OR EQUITIES MENTIONED IN THE ARTICLE.
It has been my studied belief for the last decade now that we are entering a period that monetarists and economists everywhere will in years to come call the 'the second coming of the gold standard' but actually I have coined a name for this phase that I think is more appropriate. We're now in the "PGS" era or as I like to call it, "The Pseudo Gold Standard" period. Heck, if that eternal optimist from Goldman Sachs Economics team, Jim O'Neill (he's being lined up for the Bank of England Governorship), can achieve eternal recognition, near immortality for coining the phrase "B R I C" (Brazil Russia India China in case anyone has missed it) then please give ME the credit for "PGS". By the way whilst we're at this game I may as well tell you that my friend Mr Finbar Taggit of http://www.fintag.com/ has already coined the abbreviation "P I I S" which I think takes into account the expected ejection of Greece (or is it a retreat?) from the "P I I G S" fiasco. Please don't take exception to "P I I S". I believe it stands for Portugal, Italy, Ireland and Spain who possibly are next up for a wee spot of bother although with spanish banks currently in the doldrums I think Finbar could have chosen the more chronological "S I I P", "S I P I" or perhaps "S P I I". Anyway he's taken the "P I I S" abbreviation and we must all live with it.
"PGS" for the sake of asking is in fact the blatant recognition from 'credit economies' that they'd prefer to back their currencies with bullion whilst the US, UK and all of the old European powers prefer to trash their currencies and economies through the daft and persistent programs known as QE. Just recently the IMF reported the following gold bullion purchases ;- Philippines (32 tonnes), Sri Lanka (2), Turkey (29), Mexico (3), Kazakhstan (2) and Ukraine (1.4). Can anyone spot the anomaly here? No european super-powers and just Ceylon as the former colony. Or the curiosity? Just why would Turkey buy gold and still want to join the EU.....of boy! It seems the developing world understands basic global economics and sensible sovereign governance better than many of our own central bankers, politicians, economists, etc. I'd expect more of the same here for many years to come as (financial, social and military) stress seems to be the order of the day everywhere.
In reference to the titled equation at the top of this blog just what is "PQE" then? Well, it's something else I've just coined. It's called "Personal Quantative Easing" and it goes like this. If say Mervyn King thinks that future generations of Brits are having their jobs and incomes protected through QE then "PQE" may be a valid alternative for those fed up with QE and the lack of growth equating to job creation, etc. QE as we all know creates electronic money in order to buy gilts (UK gov debt) with the idea of injecting liquidity into the financial markets and eventual economy. It's supposed to catalyse bank lending too but since there wasn't any lending to SME's before the crisis started in 2007 I don't see how we can expect to have a banking system designed to stimulate business when actually it has been profiting from the very same businesses the banking industry is and was designed to support. Pretty well since the late '80s all our commercial banks have traded against us not with us. This has been particularly true ironically of the financial services industry as we all know. That subject is for another day.
So if one has cash and one is concerned about the UK economy what does one do with it? Buying gilts has been and is a pointless exercise. They are all horrendously over-priced and only for the brave bar the odd index-linked variety. With official inflation today at c. 3% (from 5%) and possible real inflation ("pri" oh stop it!) nearer to 10% there is little scope for liquid asset protection. Banks are paying zero to a farthing on deposits and current accounts whilst higher risk building societies challenge the bank rate mechanics by offering HIGH RISK RATES without health warnings to countless unsuspecting depositors. Are these cash packages really protected by FSCS £80,000 threshold? Well, time will tell.
No, the extraordinary observation and opportunity is in "PQE". Whilst tax payers annd ordinary citizens stand by to allow QE there is a market methodology all of its own that is being devised as I speak. Starting with the premise that Gold is cheap and going up (see countless sensible analysts and their arguments for this premise) then it is easy to assume that a bonanza in gold shares will ultimately follow. Meanwhile today one can take very little risk in capital markets by purchasing shares (is the risk really any different to government backed guarantees in an horrendous debt enforced environment?) in some of the large producers at rock bottom prices (p/e's in low single digits). For example (note ALL gross yields before tax) Newmont yields 2.87%, Freeport McMoran 3.86%, Agnico Eagle 2.01%, Barrick Resources 2.00% (on LSE African Barrick yields 3.01%, Petropavlovsk 3.25% and Randgold 0.50% by comparison), GoldCorp 1.43% and there are countless others also paying out dividends on a more favourable basis than bank deposits and with the added bonus of a major pick up in prices in the foreseeable future. Much has been stated about the reason for the pricing anomaly but in essence it would appear that our old adversaries at JP Morgan and Goldman Sachs have been shorting gold shares for several years whilst going LONG the gold ETF market. It's feasible that the hedging will get reversed quite soon with new sovereigns openly buying bullion positions. The IMF and UK are just two powers that have virtually exhausted their gold reserves. I'd expect this to be reversed as the penny is indeed dropping. As an aside Newmont has stated that it's dividend policy will reflect the gold price; so if Gold goes say to $3,000pto the dividend should increase pari passu. It's mind boggling to consider though if Gold goes to the top end forecast of $60,000pto. Who said that Gold is NOT a credible investment (or currency) against a derivatives driven banking and capital markets universe? In addition if one's a bull of the oil price similar attractive yields can be found in oil majors right now. Conoco Phillips yield 4.98%, Royal Dutch Shell 5.11%, Encana 3.84% with a host of others offering returns around 2 x (+) higher than current UK and US 10-year yields. DYOR.
So try a bit of "PQE" if you recognise "PGS", you know it will one day make sense and may well get us all out of a rather large hole.
NOTE THIS BLOG IS NOT DEEMED TO BE AN INVESTMENT RECOMMENDATION FOR ANY COMMODITIES OR EQUITIES MENTIONED IN THE ARTICLE.
Thursday 24 May 2012
FACEBOOK FADEBOOK FACECROOK FUDGEBOOK
I had a call from a lady client a few hours before the Facebook (ticker FB: issue US$38) IPO launch earlier this week. She said that her sister had rung her to suggest that they both participate in Facebook because "it seems such a good idea". What did I think of it? Well, it's the answers to these questions that I get paid for, although NOT for much longer thanks to the Financial Services Authority RETAIL DISTRIBUTION REVIEW (more on RDR later!).
The lady client isn't one of the more fundamental or technically minded type of clients. The sort of conversation that I was preparing in my mind mirrored the type of conversation that most people might have with their dentist. How big is the hole? Quite big. Does it need a filling? Yes. A small one. And before one can comment the dentist has plugged the hole and sent one on one's way.
I told her straight. This is blunt broker speak when one can see a raw deal..."I wouldn't touch it with a barge pole." -"Why?" The lady enquired. "It's on a price/earnings ratio of around 10 times that of Apple or Google and Facebook doesn't in fact make anything. It has limited earnings and is 100% reliant on advertising revenues which could disappear at the flick of an eye if the depression that I think we're beginning to witness gets hold." I should point out at this juncture that for months now I've seen ALL kinds of experts roll up on my Bloomberg TV channel saying what an exciting IPO Facebook is going to be. The bull commentators outnumbered the bear commentators about 5:1. But I didn't need anyone to tell me this because I have pretty compelling experience of knowing how Wall Street operates and more importantly how it is supposed to operate. I then told the lady that I didn't expect to see a large premium over $38 (the pundits were all saying $45-$50), thought that it was too late to get an allocation anyway and on a two year view "I wouldn't be surprised to see FB trading at $5 to $10. It's looking nigh on impossible to monitarise alot of Facebook's traffic." Enough said. The conversation then moved on to more enjoyable topics such as her family and art exhibition. For record I got no business from this conversation and actually didn't achieve any commission either. I wonder how many brokers are left in the business who turn orders away as I had just done! The old brokers who taught me the basics used to always say that broking is 50% business and 50% turning away business BUT this is not how Wall Street works anymore nor indeed what is left of Threadneedle Street.
There's been alot of debate recently about how IPO's (new issues) and Secondaries (these are probably better known as rights issues, placings, entitlement offers) should manifest themselves in the modern world where the internet is such an important aspect to distribution. It's clear that fund-raising and listings everywhere are malfunctioning. Why is this happening? There are regulators and investment banking names with the supposed kudos and credibility to ensure that shareholders are ALL treated the same way on a level playing field. Unfortunately the reality is very different. In 1980's my father, a respected London stockbroker, specialised (note I don't use the word "expert") in US market and at the time there was an abundance of IPO's. Most of the major US players had offices in London but the UK broking business that my father managed was plugged into brokers in Tampa, Minneapolis and a number of other US cities. It was a people's business then and just about every deal had underwriters in New York. The business was very active indeed because in those days the US houses relied on other brokers almost exclusively for distribution outside their own institutions. The pricing mechanism was determined by whether brokers (effectively clients of the US issuing brokers) thought the deal attractive or not. Contrary to a few "experts" that appeared on Bloomberg this week there were quite a few bio-technology stocks floated on Wall Street in '82-'82 period that had p/e ratios (multiples) of 100 x to 200 x earnings. I heard a few times that the Facebook valuation was "unprecedented". It wasn't! The TMT bubble in 2000 often repeated the same experience.
What was different though is that in the modern market these very same Wall Street goliaths need to rely on retail distribution. None of these 3 major underwriters are renowned as retail specialists anyway anymore (Dean Witter had long ago been absorbed into Morgan Stanley). In fact Morgan Stanley rarely need retail at all. It now appears that 25% of the allocation was given to private punters as the Street calls them. This is a big "HELLOOOOO" and why anyone couldn't see this or make a judgement beggars belief. Incidentally because hedge funds now dominate IPO's pretty well everywhere one doesn't need to be a rocket scientist to work out that they'll be on the SHORT SIDE within days or even hours or minutes. The current legal wranglings over financial information are being investigated by SEC but I'd be surprised if Morgan Stanley or any of the underwriters did anything wrong. The scale of the issue was vast but the mechanics are always the same. The order flow delayed the float time but this has happened countless times before and is ONLY delayed to ensure a balanced opening market.
What is needed though is a SEC and FSA review (this is really what regulators should be doing) on how IPO's are distributed. For record I haven't had a call from a single US broker for years and if I did then I know that it's a signal that a deal is probably over-priced and about to be shorted by proprietary desks, hedge funds,etc. What is unforgiveable is to allow thousands of gullible US investors to get fleeced in this way.
An old brokers adage is..... "There is no such thing as an EXPERT"
Even the Greeks had theirs....."Beware of ******* bearing gifts"
"If it's TOO good to be true it usually is"
Facebook. Next stop 10 bucks.
The lady client isn't one of the more fundamental or technically minded type of clients. The sort of conversation that I was preparing in my mind mirrored the type of conversation that most people might have with their dentist. How big is the hole? Quite big. Does it need a filling? Yes. A small one. And before one can comment the dentist has plugged the hole and sent one on one's way.
I told her straight. This is blunt broker speak when one can see a raw deal..."I wouldn't touch it with a barge pole." -"Why?" The lady enquired. "It's on a price/earnings ratio of around 10 times that of Apple or Google and Facebook doesn't in fact make anything. It has limited earnings and is 100% reliant on advertising revenues which could disappear at the flick of an eye if the depression that I think we're beginning to witness gets hold." I should point out at this juncture that for months now I've seen ALL kinds of experts roll up on my Bloomberg TV channel saying what an exciting IPO Facebook is going to be. The bull commentators outnumbered the bear commentators about 5:1. But I didn't need anyone to tell me this because I have pretty compelling experience of knowing how Wall Street operates and more importantly how it is supposed to operate. I then told the lady that I didn't expect to see a large premium over $38 (the pundits were all saying $45-$50), thought that it was too late to get an allocation anyway and on a two year view "I wouldn't be surprised to see FB trading at $5 to $10. It's looking nigh on impossible to monitarise alot of Facebook's traffic." Enough said. The conversation then moved on to more enjoyable topics such as her family and art exhibition. For record I got no business from this conversation and actually didn't achieve any commission either. I wonder how many brokers are left in the business who turn orders away as I had just done! The old brokers who taught me the basics used to always say that broking is 50% business and 50% turning away business BUT this is not how Wall Street works anymore nor indeed what is left of Threadneedle Street.
There's been alot of debate recently about how IPO's (new issues) and Secondaries (these are probably better known as rights issues, placings, entitlement offers) should manifest themselves in the modern world where the internet is such an important aspect to distribution. It's clear that fund-raising and listings everywhere are malfunctioning. Why is this happening? There are regulators and investment banking names with the supposed kudos and credibility to ensure that shareholders are ALL treated the same way on a level playing field. Unfortunately the reality is very different. In 1980's my father, a respected London stockbroker, specialised (note I don't use the word "expert") in US market and at the time there was an abundance of IPO's. Most of the major US players had offices in London but the UK broking business that my father managed was plugged into brokers in Tampa, Minneapolis and a number of other US cities. It was a people's business then and just about every deal had underwriters in New York. The business was very active indeed because in those days the US houses relied on other brokers almost exclusively for distribution outside their own institutions. The pricing mechanism was determined by whether brokers (effectively clients of the US issuing brokers) thought the deal attractive or not. Contrary to a few "experts" that appeared on Bloomberg this week there were quite a few bio-technology stocks floated on Wall Street in '82-'82 period that had p/e ratios (multiples) of 100 x to 200 x earnings. I heard a few times that the Facebook valuation was "unprecedented". It wasn't! The TMT bubble in 2000 often repeated the same experience.
What was different though is that in the modern market these very same Wall Street goliaths need to rely on retail distribution. None of these 3 major underwriters are renowned as retail specialists anyway anymore (Dean Witter had long ago been absorbed into Morgan Stanley). In fact Morgan Stanley rarely need retail at all. It now appears that 25% of the allocation was given to private punters as the Street calls them. This is a big "HELLOOOOO" and why anyone couldn't see this or make a judgement beggars belief. Incidentally because hedge funds now dominate IPO's pretty well everywhere one doesn't need to be a rocket scientist to work out that they'll be on the SHORT SIDE within days or even hours or minutes. The current legal wranglings over financial information are being investigated by SEC but I'd be surprised if Morgan Stanley or any of the underwriters did anything wrong. The scale of the issue was vast but the mechanics are always the same. The order flow delayed the float time but this has happened countless times before and is ONLY delayed to ensure a balanced opening market.
What is needed though is a SEC and FSA review (this is really what regulators should be doing) on how IPO's are distributed. For record I haven't had a call from a single US broker for years and if I did then I know that it's a signal that a deal is probably over-priced and about to be shorted by proprietary desks, hedge funds,etc. What is unforgiveable is to allow thousands of gullible US investors to get fleeced in this way.
An old brokers adage is..... "There is no such thing as an EXPERT"
Even the Greeks had theirs....."Beware of ******* bearing gifts"
"If it's TOO good to be true it usually is"
Facebook. Next stop 10 bucks.
Tuesday 22 May 2012
The London Stock Exchange is in an unholy mess Mr Cameron, sort it out NOW please
Dear Mr Cameron
The old Stock Exchange Members book of 1973-74 (I'm sure your family still have a copy in your possession after your late father's exploits at Panmure Gordon & Co) has been taken from the book shelf and I'm just reminding myself of the once great market that my family were part of since 1872. You see it was a free thinking market made up primarily of people who looked after their clients (there were no account numbers or client agreements in those days), understood their roles in the support of UK business, invested freely without hindrance on instant calculating decisions (these were called hunches), gleaned that the clients came first, took for granted that investee companies behaved responsibly at all times (the rogues gallery was much smaller back then I think), calculated that balance sheets and p&l accounts were properly audited, assumed that published reports and accounts were transparent, took full responsibility for their affairs as well as those of their clients, assumed full personal UNLIMITED liability for their affairs as well as their clients and honoured ALL commitments to clients and market counterparties, took pride in the exchange that they were part of and above all enjoyed themselves in a friendly market that had the decency to look after fallen brethren through committed benovolence. DICTUM MEUM PACTUM was practiced rather than taught. Integrity at all times was paramount and could NOT be bought.
Well as you can imagine I'm not exactly ecstatic at the current exchange that your government presides over.
Today bankers, hedgies and most brokers take NO responsibility for their actions (often aided and abetted by compliance personnel whose pockets they often control), never take a financial hit for malpractice or obtuse client losses, treat shareholders with utter contempt and incredibly are still committed to a bonus culture despite the misgivings of those who feel strongly about the unlevel playing field in the workplace.
More important than any of the above though, as well as the current behaviour of the above alongside the FSA and CISI (APCIMS are the only ones who can hold their heads up at these difficult times) the most extraordinary sideshow has been the utter beligerance of the London Stock Exchange itself. On the face of it as a PLC it has done extraordinary well but sadly as an effective functioning exchange for securities representing UK PLC's, capital raising,etc the exchange is failing daily (just look at brokers volumes). There are two primary causes for this. Firstly the exchange is profiteering at the expense of investors and secondly the regulatory experiment is failing at an alarming rate. What is deeply concerning me is that virtually no-one can see this. But then again not many politicians, regulators nor indeed practititioners in the dark art and science of capital markets spotted the 2007/2008 banking crisis either. There is a secret ingredient as Chelsea FC found out by chance over the weekend. Despite countless highly paid managers their success evolved through something which one cannot find in a cv or through a qualification. No it's NOT hard work but this always helps as Mr Osborne has correctly pointed out. No, the secret ingredient is "HEART" Mr. Cameron.
It is the very heart of the exchange that concerns me. It is not ticking as it should and if there are NOT structural changes made to the exchange soon I fear that the exchange itself may suffer a serious heart attack. One of the unnerving aspects of your coalition and indeed the opposition (the culprits perhaps although the seeds were sown as far back as the 80's) is that much emphasis is placed on jobs and support given to big business BUT I see little assistance given to sole traders, small micro-partnerships and SME's. Red tape is rife and crucifying entrepreneurship everywhere and the evidence supports my belief that this started inside our very exchange largely thanks to over-regulation (TSA, SFA and now FSA towards FCA already known as "fuCA" and other hydras) since 1986. One can use the acorns to oak tree analogies till one's blue in the face but acorns everywhere are STILL being crushed by the weight of red tape, regulation, lack of investment and a host of other reasons.
It's interesting to note that in the 1973-1974 members book that there were 100's of broking firms as well as considerable numbers of jobbing firms supported by around 3,000+ members. Most of the firms supported private investors whilst maybe only a dozen or so focused their business models on the corporate market. Since 'Big Bang' the regulators have ostensibly calved up the private end of the market and evolved their very existence on governmental support and cosy relationships with the investment banks. I doubt that banks have ever really had the interest of business at 'heart' as their remits have been profit motives rather than job creativity. Conversely the core parts of the market have been reliant on private enterprise and with it private investment supported by a spiders web force of private brokers maintaining good working relationships with investors. Two things have engineered the destruction of these relationships. The first of course has been the development of the technology supporting business and industry (the internet); we all have to learn to live with the internet. The second has been (over) regulation which has broken the camels back of personal and private investing towards a mangled universe of faceless wealth managers who often than not support funds rather than actual companies. It isn't just coincidence that the AIM and Plus markets are suffering from low volumes and low interest. Long only institutions and hedge funds have no interest in supporting businesses these days and use the liquidity argument when challenged about this. Liquidity is really just a function of the market constituents and if the exchange and regulator takes away the opportunity then the market cannot support itself. It's my belief that the governement should open a debate, even an enquiry (although I doubt that practitioners such as myself would ever get invited to attend) into this BUT much worse is the FSA doctrine that is called mildly 'The Retail Distribution Review'. Thousands of brokers will be wiped out by this (including myself) whilst the new age survivors (mainly young inexperienced personnel who have questionable degrees and pointless qualifications directed around regulation) will be drawn towards funds, ETFs etc. Importantly aged investors will find it difficult dealing with these new age brokers. The average age of brokers has dramatically shifted since 1980 when I joined a private firm. Most were aged militarians and I would say the good ones were often 50+. Today I am 55 and considered ancient and out of touch with regulation. This I may be but frankly I care more about client relationships and markets than what regulators think. It's rather like driving a motor vehicle and having the steering wheel taken away these days. Compliance have the wheel and the new SUITABILITY rules and redefining of RISK are so way beyond the mark that there's every chance that more business will be driven away from UK via the internet towards softer compliance regimes.
As you can gather I dislike the regime that is at the heart of the problem. It seems that surgery is required or even a heart replacement.
My solution is simply either to refranchise the LSE (from a PLC) to private members or even better to pass an Act of Parliament allowing for a new Unlimited Liability Exchange to be created and developed by private brokers without the hindrance of external regulation (that is no FCA and no inteference from Europe). Many have suggested something similar in the past. Now is the time for leadership Mr. Cameron. UK PLC needs new direction and an exchange that supports business and industry. An exchange with "Heart" and common sense will do wonders for future generations as past generations can testify. The current exchange may be sufficient for overseas business but it is not functioning in the interests of British taxpayers or workers.
Incidentally I'm still awaiting your response to my previous communications regarding FSA and RDR. I hope that you might have the decency this time to respond to my concerns.
Yours
Richard Hoblyn
The old Stock Exchange Members book of 1973-74 (I'm sure your family still have a copy in your possession after your late father's exploits at Panmure Gordon & Co) has been taken from the book shelf and I'm just reminding myself of the once great market that my family were part of since 1872. You see it was a free thinking market made up primarily of people who looked after their clients (there were no account numbers or client agreements in those days), understood their roles in the support of UK business, invested freely without hindrance on instant calculating decisions (these were called hunches), gleaned that the clients came first, took for granted that investee companies behaved responsibly at all times (the rogues gallery was much smaller back then I think), calculated that balance sheets and p&l accounts were properly audited, assumed that published reports and accounts were transparent, took full responsibility for their affairs as well as those of their clients, assumed full personal UNLIMITED liability for their affairs as well as their clients and honoured ALL commitments to clients and market counterparties, took pride in the exchange that they were part of and above all enjoyed themselves in a friendly market that had the decency to look after fallen brethren through committed benovolence. DICTUM MEUM PACTUM was practiced rather than taught. Integrity at all times was paramount and could NOT be bought.
Well as you can imagine I'm not exactly ecstatic at the current exchange that your government presides over.
Today bankers, hedgies and most brokers take NO responsibility for their actions (often aided and abetted by compliance personnel whose pockets they often control), never take a financial hit for malpractice or obtuse client losses, treat shareholders with utter contempt and incredibly are still committed to a bonus culture despite the misgivings of those who feel strongly about the unlevel playing field in the workplace.
More important than any of the above though, as well as the current behaviour of the above alongside the FSA and CISI (APCIMS are the only ones who can hold their heads up at these difficult times) the most extraordinary sideshow has been the utter beligerance of the London Stock Exchange itself. On the face of it as a PLC it has done extraordinary well but sadly as an effective functioning exchange for securities representing UK PLC's, capital raising,etc the exchange is failing daily (just look at brokers volumes). There are two primary causes for this. Firstly the exchange is profiteering at the expense of investors and secondly the regulatory experiment is failing at an alarming rate. What is deeply concerning me is that virtually no-one can see this. But then again not many politicians, regulators nor indeed practititioners in the dark art and science of capital markets spotted the 2007/2008 banking crisis either. There is a secret ingredient as Chelsea FC found out by chance over the weekend. Despite countless highly paid managers their success evolved through something which one cannot find in a cv or through a qualification. No it's NOT hard work but this always helps as Mr Osborne has correctly pointed out. No, the secret ingredient is "HEART" Mr. Cameron.
It is the very heart of the exchange that concerns me. It is not ticking as it should and if there are NOT structural changes made to the exchange soon I fear that the exchange itself may suffer a serious heart attack. One of the unnerving aspects of your coalition and indeed the opposition (the culprits perhaps although the seeds were sown as far back as the 80's) is that much emphasis is placed on jobs and support given to big business BUT I see little assistance given to sole traders, small micro-partnerships and SME's. Red tape is rife and crucifying entrepreneurship everywhere and the evidence supports my belief that this started inside our very exchange largely thanks to over-regulation (TSA, SFA and now FSA towards FCA already known as "fuCA" and other hydras) since 1986. One can use the acorns to oak tree analogies till one's blue in the face but acorns everywhere are STILL being crushed by the weight of red tape, regulation, lack of investment and a host of other reasons.
It's interesting to note that in the 1973-1974 members book that there were 100's of broking firms as well as considerable numbers of jobbing firms supported by around 3,000+ members. Most of the firms supported private investors whilst maybe only a dozen or so focused their business models on the corporate market. Since 'Big Bang' the regulators have ostensibly calved up the private end of the market and evolved their very existence on governmental support and cosy relationships with the investment banks. I doubt that banks have ever really had the interest of business at 'heart' as their remits have been profit motives rather than job creativity. Conversely the core parts of the market have been reliant on private enterprise and with it private investment supported by a spiders web force of private brokers maintaining good working relationships with investors. Two things have engineered the destruction of these relationships. The first of course has been the development of the technology supporting business and industry (the internet); we all have to learn to live with the internet. The second has been (over) regulation which has broken the camels back of personal and private investing towards a mangled universe of faceless wealth managers who often than not support funds rather than actual companies. It isn't just coincidence that the AIM and Plus markets are suffering from low volumes and low interest. Long only institutions and hedge funds have no interest in supporting businesses these days and use the liquidity argument when challenged about this. Liquidity is really just a function of the market constituents and if the exchange and regulator takes away the opportunity then the market cannot support itself. It's my belief that the governement should open a debate, even an enquiry (although I doubt that practitioners such as myself would ever get invited to attend) into this BUT much worse is the FSA doctrine that is called mildly 'The Retail Distribution Review'. Thousands of brokers will be wiped out by this (including myself) whilst the new age survivors (mainly young inexperienced personnel who have questionable degrees and pointless qualifications directed around regulation) will be drawn towards funds, ETFs etc. Importantly aged investors will find it difficult dealing with these new age brokers. The average age of brokers has dramatically shifted since 1980 when I joined a private firm. Most were aged militarians and I would say the good ones were often 50+. Today I am 55 and considered ancient and out of touch with regulation. This I may be but frankly I care more about client relationships and markets than what regulators think. It's rather like driving a motor vehicle and having the steering wheel taken away these days. Compliance have the wheel and the new SUITABILITY rules and redefining of RISK are so way beyond the mark that there's every chance that more business will be driven away from UK via the internet towards softer compliance regimes.
As you can gather I dislike the regime that is at the heart of the problem. It seems that surgery is required or even a heart replacement.
My solution is simply either to refranchise the LSE (from a PLC) to private members or even better to pass an Act of Parliament allowing for a new Unlimited Liability Exchange to be created and developed by private brokers without the hindrance of external regulation (that is no FCA and no inteference from Europe). Many have suggested something similar in the past. Now is the time for leadership Mr. Cameron. UK PLC needs new direction and an exchange that supports business and industry. An exchange with "Heart" and common sense will do wonders for future generations as past generations can testify. The current exchange may be sufficient for overseas business but it is not functioning in the interests of British taxpayers or workers.
Incidentally I'm still awaiting your response to my previous communications regarding FSA and RDR. I hope that you might have the decency this time to respond to my concerns.
Yours
Richard Hoblyn
The Greek Solution to a global tragedy and euro-farce
As events have unfolded these past few months it has been clear to quite a few market commentators that the issues surrounding the fate of the EuroZone, the fate of the Euro, the fate of the G word (did anyone say 'growth'? what growth?), indeed the fate of capitalism in Europe following a century when there were 2 world wars is likely to be severely tested in the coming months.
The battle between left and right, left of centre and right of centre, and combinations thereon, are NOT the real issues here. Granted, the recent success of Franky Hollande in France and the rise of the left in Greece has certainly increased the tension between socialist ideaology and free-market capitalism but this is really a side show to the real problems.
Most people on Wall Street or other financial centres realise that this really is a numbers game and until the politicians start taking guidance from the markets then these tensions will persist to a possible armageddon outcome. In any event the future for the price of Gold looks supremely rosy, possibly supremely sparkling.
Today markets are faced with G8+2 = G10 (see earlier post) and possibly a few others trying to either provide damage limitation in the event of a Greek bailout (number anyone?) again or even greater damage limitation in the event of a Greek default. In either event what is quite clear is that Greece is in no position to service any form of debt, interest, instrument, roll-over of bonds, derivatives nor indeed anything as it appears to be in an unholy mess. Structurally Athens resembles a financial and fiscal armageddon. Any wealth has already exited in the direction of swiss banks, London real estate, a few greek registered tankers scattering towards the new world leaving the people in a state of confusion, bewilderment, frustration, repression and depression. There are no solutions to the Greek debt crisis simply because there are just too many opposing vested interests. An example is the estimated $100bn derivatives exposure; if Greece defaults then the counterparties, JPMorgan, Goldman Sachs, european banks, global banks, sovereign states, etc would receive an horrendous jolt leaving Wall Street nursing severe losses in equities and bonds. I could easily see a NO BID free markets scenario unfold which would make the '29 crash look like a walk in the park.
A return to the Drachma is one (only?) solution but too many other commentators are fixated on the fall out for creditors. I'm not sure that many have taken on board the full extent of the Greek tragedy here. It is necessary for Greece to start with a total clean sheet whether the ECB, G8+2 = G10, etc create some sort of orderly (in reality there's little chance of anything orderly occurring because markets will pick at the weaknesses in the process) bailout or if Greece chooses to exit either in an orderly or disorderly fashion (the most likely scenario). I was speaking to a few clients recently, many versed in Greek political and economic history better than myself, and we reminded ourselves of the 'Greek Colonel' scenario that might be unfolding shortly. Some military intervention with the purported backing of the people both in Greece and even Spain is not completely out of the question.
What is required though is a rapid and convincing case for complete and utter default along the lines of 'no negotiation for creditors', ' an instant exit from EuroZone, the Euro and the euroland fantasy', a promise from Greece to instate a credible tax universe attracting outside investors and the repatriation of Greek assets. It's likely that even then Greece would have riots, social unrest, a divided political system and in this contect it is imperative that some sort of social aid program should be proffered by IMF & "G10". Of course so long as we're all fixated on "too big to fail" and possible "contagion" doctrine nothing positive will ever happen. Politicians and regulators (basically they're the new Gestapo for the sake of anything positive to say about regulation) need to wake up and smell the coffee here asap. A quick glance at Wikipedia under 'sovereign default' should remind everyone that there have been some considerable NOT 'too big to fail' sovereign defaults combined with debt restructuring already in history; here are just some of them---Spain 1557-1596 (four times), Bourbon France after the French Revolution, Denmark 1850, Russia 1917, Confederate States after the American Civil War and more recently Argentina 1982 & 1989 and Russia 1991 & 1998. Incredibly the global tally is Africa c.39; Americas c. 150 (unbelievable statistic); Asia c.26 and Europe c. 91. In fact Greece had problems in 1826, 1843, 1860, 1893 and 1932. It's certainly worth contemplating these extraordinary statistics before anyone thinks that Greece is going to bring down capital markets, world economies and free capitalism.
The battle between left and right, left of centre and right of centre, and combinations thereon, are NOT the real issues here. Granted, the recent success of Franky Hollande in France and the rise of the left in Greece has certainly increased the tension between socialist ideaology and free-market capitalism but this is really a side show to the real problems.
Most people on Wall Street or other financial centres realise that this really is a numbers game and until the politicians start taking guidance from the markets then these tensions will persist to a possible armageddon outcome. In any event the future for the price of Gold looks supremely rosy, possibly supremely sparkling.
Today markets are faced with G8+2 = G10 (see earlier post) and possibly a few others trying to either provide damage limitation in the event of a Greek bailout (number anyone?) again or even greater damage limitation in the event of a Greek default. In either event what is quite clear is that Greece is in no position to service any form of debt, interest, instrument, roll-over of bonds, derivatives nor indeed anything as it appears to be in an unholy mess. Structurally Athens resembles a financial and fiscal armageddon. Any wealth has already exited in the direction of swiss banks, London real estate, a few greek registered tankers scattering towards the new world leaving the people in a state of confusion, bewilderment, frustration, repression and depression. There are no solutions to the Greek debt crisis simply because there are just too many opposing vested interests. An example is the estimated $100bn derivatives exposure; if Greece defaults then the counterparties, JPMorgan, Goldman Sachs, european banks, global banks, sovereign states, etc would receive an horrendous jolt leaving Wall Street nursing severe losses in equities and bonds. I could easily see a NO BID free markets scenario unfold which would make the '29 crash look like a walk in the park.
A return to the Drachma is one (only?) solution but too many other commentators are fixated on the fall out for creditors. I'm not sure that many have taken on board the full extent of the Greek tragedy here. It is necessary for Greece to start with a total clean sheet whether the ECB, G8+2 = G10, etc create some sort of orderly (in reality there's little chance of anything orderly occurring because markets will pick at the weaknesses in the process) bailout or if Greece chooses to exit either in an orderly or disorderly fashion (the most likely scenario). I was speaking to a few clients recently, many versed in Greek political and economic history better than myself, and we reminded ourselves of the 'Greek Colonel' scenario that might be unfolding shortly. Some military intervention with the purported backing of the people both in Greece and even Spain is not completely out of the question.
What is required though is a rapid and convincing case for complete and utter default along the lines of 'no negotiation for creditors', ' an instant exit from EuroZone, the Euro and the euroland fantasy', a promise from Greece to instate a credible tax universe attracting outside investors and the repatriation of Greek assets. It's likely that even then Greece would have riots, social unrest, a divided political system and in this contect it is imperative that some sort of social aid program should be proffered by IMF & "G10". Of course so long as we're all fixated on "too big to fail" and possible "contagion" doctrine nothing positive will ever happen. Politicians and regulators (basically they're the new Gestapo for the sake of anything positive to say about regulation) need to wake up and smell the coffee here asap. A quick glance at Wikipedia under 'sovereign default' should remind everyone that there have been some considerable NOT 'too big to fail' sovereign defaults combined with debt restructuring already in history; here are just some of them---Spain 1557-1596 (four times), Bourbon France after the French Revolution, Denmark 1850, Russia 1917, Confederate States after the American Civil War and more recently Argentina 1982 & 1989 and Russia 1991 & 1998. Incredibly the global tally is Africa c.39; Americas c. 150 (unbelievable statistic); Asia c.26 and Europe c. 91. In fact Greece had problems in 1826, 1843, 1860, 1893 and 1932. It's certainly worth contemplating these extraordinary statistics before anyone thinks that Greece is going to bring down capital markets, world economies and free capitalism.
Monday 21 May 2012
G8+2 = G10
Like many millions of people globally I was transfixed at the weekend by two seismic events. The first was a certain soccer match in Munich and the other was Obama's tea party at Camp David, Maryland, which by coincidence seemed to get more newsreel through it's watching of the said clash between Germany (Merkel) and UK (Cameron; note Osborne was spotted a few seats along the line from Michel Platini at the match) than the real matters of state. Watching the brief news item on the G8 around an Arthurian Round Table I took a double take. Who are the G8? Well I recognised most of them but wasn't sure who the asian gentleman was, was he a chinese leader or perhaps japanese? On closer examination I discovered that he was the Japanese PM. And then it hit me.
None of these people can count.
I'm sure millions of kindergarten children would have spotted this but '00s of market commentators who are paraded daily on Bloomberg, CNBC, BBC, CNN, Russia Today, France24, etc all appear to have failed to appreciate the simple error as well as the supreme irony in this algebric miscalculation. In a world that is reeling from bad balance sheets, derivative black holes, bond issuances, QE, Tarp it is almost unimaginable that no journalist could have spotted the obvious error either.
The G8 is in fact "G8+2 = G10" or if you're a eurocrat simply "G10".
It would appear that Mr Putin could see the elementary futility of the 'cheap seats' tea party at the camp so he sent his sidekick along, PM Medvedev, who by all accounts was having a jolly time with DaveCam.
The accounting error (that is the '2' aspect to the complicated mathematical equation) apparently has been described as 'off balance sheet' by the Federal Reserve (sic!) & Goldman Sachs (sic 2!) but for clarity at least one present was an unelected politician Van Rompuy who Nigel Farage has had in his sights for some time and the other being Barroso. Of course Italy's Monti is unelected too but that's a minor issue to the greater accounting error.
So now can we please refer to this pact as the "G8+2 = G10" aka "G10".
None of these people can count.
I'm sure millions of kindergarten children would have spotted this but '00s of market commentators who are paraded daily on Bloomberg, CNBC, BBC, CNN, Russia Today, France24, etc all appear to have failed to appreciate the simple error as well as the supreme irony in this algebric miscalculation. In a world that is reeling from bad balance sheets, derivative black holes, bond issuances, QE, Tarp it is almost unimaginable that no journalist could have spotted the obvious error either.
The G8 is in fact "G8+2 = G10" or if you're a eurocrat simply "G10".
It would appear that Mr Putin could see the elementary futility of the 'cheap seats' tea party at the camp so he sent his sidekick along, PM Medvedev, who by all accounts was having a jolly time with DaveCam.
The accounting error (that is the '2' aspect to the complicated mathematical equation) apparently has been described as 'off balance sheet' by the Federal Reserve (sic!) & Goldman Sachs (sic 2!) but for clarity at least one present was an unelected politician Van Rompuy who Nigel Farage has had in his sights for some time and the other being Barroso. Of course Italy's Monti is unelected too but that's a minor issue to the greater accounting error.
So now can we please refer to this pact as the "G8+2 = G10" aka "G10".
Thursday 12 April 2012
Review 1 Q 2012 11th April 2012
"Gold has worked down from Alexander's time.....When something holds good for two thousand years, I do not believe it can be so because of prejudice or mistaken theory." -Bernard Baruch, Wall Street legend & friend of Jesse Livermore
The over-exuberance in blue chip equities in the 1 Q 2012 has as I write stalled as a reality check is now taking place. It has not been an easy market so far this year with virtually all the bull commentators being paraded up and down on our screens with hopes for growth and recovery. Fortunately many clients and market professionals that I communicate with have taken these prophecies with a pinch of salt. There are many causes for my extreme caution but at the forefront it must be the state of the EU as more pressure is applied to (10 year) bond yields. Austerity measures may be good for politicians but the real effects are that there can be little job creation without substantial investment, better tax incentives for businesses and taking a scythe to red tape and regulation. The latter in particular has been ignored by politicians as SME’s and self-employed (“libres professionnels”) struggle to actually do what their skills are designed for. No-one has broadcast any statistics on how much time is spent per day on all this red tape but my guess is that it is now around 30% of everyone’s day and rising inextricably. In essence thousands of wasted man hours are unproductive which in the end cannot be good for the recovery phase or capitalism per se. The completely ineffective attempt to cut the Public Sector purse in the UK is just an example of the ineptness of the western systems that everyone knows are now creaking at the hinges. From an investing standpoint it would appear that CASH is KING at this critical time as the impending Sputnik Moment for bond markets approaches. It amazes me why so many are scampering for 2% yields (in a universe where inflation is 4 to 5% official) and why so many market people seem to think that Italian and Spanish bond yields in the 6% area are already so damaging (going much higher). Was it that long ago that War Loan yielded 10%+ or that mortgage rates in UK were in the mid-teens? It does seem that traders and their trading mentality appear to be ruling markets still and now the heads of many investors too. My own view is that equities may yield 3%+ in places right now, with large int’l companies throwing off cash at almost unprecedented levels, but this is NOT a good enough reason to chase current share prices against a potentially cataclysmic debacle that might occur in the (f/x, bond & equity) markets gyrating into much much higher bond yields (my own forecast for Italy/Spain 10 year bond yields is 20%+ this year). The risk/reward ratio is just too imbalanced for me at this stage of the QE/Operation Twist process(es) and I’d rather hold precious metals and oil stocks despite the pain that they have suffered to date. As I write FTSE100 is around 5,630 (c.300 points off the high) and the DJIA at 12,715 (from c.13,000). This is hardly a big correction so far so there’s quite some downside if things in EU do get worse hereon. The China slowdown is not helping either with current GDP growth of c.9% forecast to drop to 7½% but the real problem there is the construction/property bubble which has got to epic proportions. With over 500 million in the Chinese workforce there are just too many properties constructed and being developed. The over-supply has already led to some spectacular falls in prices (-35% in Beijing last November) and further pressure is predicted. In fact elsewhere Citibank has just suggested that US prices are also 25% over-valued today even after severe falls there. You don’t need me to tell you how I feel about UK property prices. Did I mention the geopolitical developments in the Middle East? Syria, Turkey, Iran, Egypt, Bahrain, Yemen…..well, the list goes on and on. There’s no need to mention the ‘c’ word in Africa either. They’ve been having ‘coups’ there for decades since the imperialists departed. Just in the last year Randgold Resources has had its share price slump at the mercy of shenanigans in the Ivory Coast and more recently Mali where it has 2/3 of its gold operations. But of course the terrain and behavioural patterns are the norm for the Dark Continent. Not so elsewhere in the more developed universe. It wouldn’t surprise me if the Colonels have the last say in Athens or even Madrid.
Reminding ourselves of Bernard Baruch’s famous quote for a minute only leaves me to continue to focus on gold (Randgold, African Barrick, Shanta are all trading too cheaply), oil shares (Royal Dutch Shell at 2180p is getting close to sub-£20 and I’d like to see BP nearer to £4), the old frontiers of Africa (although it’s RISK OFF right now) and other emerging markets (I still prefer Russia and Brazil), solid international investment trusts on pull backs and up to 25% holding cash (in a mix of currencies in addition to £stg & US$) but avoiding the Euro (still). The oil price is still impossible to predict as it appears to have found its range for the short-term but shortages at the pumps are going to become the norm I suspect.
With regard to other specific stock selections I like the look of mid-tier oils such as Premier Oil, Heritage Oil, Hardy O&G, Soco Int’l, Exillion, Chariot O&G and Genel who remain out of favour. In FTSE I’d prefer to look at BAE Systems nearer 260p, GlaxoSmithKline nearer £13, Sainsbury nearer 265p, HSBC nearer 460p and Standard Chartered nearer £12. My 2012 tip Tullett Prebon now near 350p is getting overbought (prefer to buy below £3) although is still a HOLD on takeover hopes. Amongst investment trusts I think purchasing the following on a 10%+ markets correction may be prudent; JPMorgan Claverhouse, Henderson Far East, Schroder Oriental, Securities Trust of Scotland, Merchants Trust and JPMorgan Global Emerging Income. As far as the rest of the UK market is concerned I’m being very selective and prefer international equities but it’s important to avoid those with too much exposure to China, general commodities and anything financial or consumer related. With around 30% of FTSE100 constituents exposed in China it may be prudent to avoid those with connections there. Who knows but the China slump could be the big surprise around the corner.
I continue to encourage portfolio weightings such as 0% Fixed Interest, 20-35% cash, maximum 80% equities (overseas earners mainly incl. 25%-40% in precious metals stocks, a spread of investment trusts). Much has been discussed recently regarding safe havens and the safety of ETF’s and I continue to avoid these vehicles for private investors as I believe there are major regulatory concerns in this area. The level of the coming correction is the key and I still feel that 10-30% is possible which implies 4,776 (20% from 5,970 recent high) on FTSE100. Looking at what happened in the mid-1930’s it’s interesting to note that US$10,000 invested in DJIA in Oct 1929 would have turned into US$3,600 by Dec 1935 whereas the same amount invested in Homestake Mining, a gold miner, grew to US$62,000 i.e 6.2x. During the 1973/74 slump when stocks depreciated over 50% the large gold cap stocks increased 260%+. If the precious metals shares bull does return then spectacular returns could be achieved in the foreseeable future with some of the gold shares already purchased. Many are suggesting that comparisons are unfair with the ‘30s but history has a funny habit of repeating itself. GFMS, the precious metals research group, have just predicted that a looming flare-up in the Eurozone will propel the price of gold towards $2,000 an ounce this year. Exactly!
“Hasta la vista”…….as Spain (it’s debt dwarfs Greece, Italy and the other fringe players) gets nearer to the markets sights the phrase seems more than appropriate.
Let’s hope that Spring doesn’t disappoint.
The over-exuberance in blue chip equities in the 1 Q 2012 has as I write stalled as a reality check is now taking place. It has not been an easy market so far this year with virtually all the bull commentators being paraded up and down on our screens with hopes for growth and recovery. Fortunately many clients and market professionals that I communicate with have taken these prophecies with a pinch of salt. There are many causes for my extreme caution but at the forefront it must be the state of the EU as more pressure is applied to (10 year) bond yields. Austerity measures may be good for politicians but the real effects are that there can be little job creation without substantial investment, better tax incentives for businesses and taking a scythe to red tape and regulation. The latter in particular has been ignored by politicians as SME’s and self-employed (“libres professionnels”) struggle to actually do what their skills are designed for. No-one has broadcast any statistics on how much time is spent per day on all this red tape but my guess is that it is now around 30% of everyone’s day and rising inextricably. In essence thousands of wasted man hours are unproductive which in the end cannot be good for the recovery phase or capitalism per se. The completely ineffective attempt to cut the Public Sector purse in the UK is just an example of the ineptness of the western systems that everyone knows are now creaking at the hinges. From an investing standpoint it would appear that CASH is KING at this critical time as the impending Sputnik Moment for bond markets approaches. It amazes me why so many are scampering for 2% yields (in a universe where inflation is 4 to 5% official) and why so many market people seem to think that Italian and Spanish bond yields in the 6% area are already so damaging (going much higher). Was it that long ago that War Loan yielded 10%+ or that mortgage rates in UK were in the mid-teens? It does seem that traders and their trading mentality appear to be ruling markets still and now the heads of many investors too. My own view is that equities may yield 3%+ in places right now, with large int’l companies throwing off cash at almost unprecedented levels, but this is NOT a good enough reason to chase current share prices against a potentially cataclysmic debacle that might occur in the (f/x, bond & equity) markets gyrating into much much higher bond yields (my own forecast for Italy/Spain 10 year bond yields is 20%+ this year). The risk/reward ratio is just too imbalanced for me at this stage of the QE/Operation Twist process(es) and I’d rather hold precious metals and oil stocks despite the pain that they have suffered to date. As I write FTSE100 is around 5,630 (c.300 points off the high) and the DJIA at 12,715 (from c.13,000). This is hardly a big correction so far so there’s quite some downside if things in EU do get worse hereon. The China slowdown is not helping either with current GDP growth of c.9% forecast to drop to 7½% but the real problem there is the construction/property bubble which has got to epic proportions. With over 500 million in the Chinese workforce there are just too many properties constructed and being developed. The over-supply has already led to some spectacular falls in prices (-35% in Beijing last November) and further pressure is predicted. In fact elsewhere Citibank has just suggested that US prices are also 25% over-valued today even after severe falls there. You don’t need me to tell you how I feel about UK property prices. Did I mention the geopolitical developments in the Middle East? Syria, Turkey, Iran, Egypt, Bahrain, Yemen…..well, the list goes on and on. There’s no need to mention the ‘c’ word in Africa either. They’ve been having ‘coups’ there for decades since the imperialists departed. Just in the last year Randgold Resources has had its share price slump at the mercy of shenanigans in the Ivory Coast and more recently Mali where it has 2/3 of its gold operations. But of course the terrain and behavioural patterns are the norm for the Dark Continent. Not so elsewhere in the more developed universe. It wouldn’t surprise me if the Colonels have the last say in Athens or even Madrid.
Reminding ourselves of Bernard Baruch’s famous quote for a minute only leaves me to continue to focus on gold (Randgold, African Barrick, Shanta are all trading too cheaply), oil shares (Royal Dutch Shell at 2180p is getting close to sub-£20 and I’d like to see BP nearer to £4), the old frontiers of Africa (although it’s RISK OFF right now) and other emerging markets (I still prefer Russia and Brazil), solid international investment trusts on pull backs and up to 25% holding cash (in a mix of currencies in addition to £stg & US$) but avoiding the Euro (still). The oil price is still impossible to predict as it appears to have found its range for the short-term but shortages at the pumps are going to become the norm I suspect.
With regard to other specific stock selections I like the look of mid-tier oils such as Premier Oil, Heritage Oil, Hardy O&G, Soco Int’l, Exillion, Chariot O&G and Genel who remain out of favour. In FTSE I’d prefer to look at BAE Systems nearer 260p, GlaxoSmithKline nearer £13, Sainsbury nearer 265p, HSBC nearer 460p and Standard Chartered nearer £12. My 2012 tip Tullett Prebon now near 350p is getting overbought (prefer to buy below £3) although is still a HOLD on takeover hopes. Amongst investment trusts I think purchasing the following on a 10%+ markets correction may be prudent; JPMorgan Claverhouse, Henderson Far East, Schroder Oriental, Securities Trust of Scotland, Merchants Trust and JPMorgan Global Emerging Income. As far as the rest of the UK market is concerned I’m being very selective and prefer international equities but it’s important to avoid those with too much exposure to China, general commodities and anything financial or consumer related. With around 30% of FTSE100 constituents exposed in China it may be prudent to avoid those with connections there. Who knows but the China slump could be the big surprise around the corner.
I continue to encourage portfolio weightings such as 0% Fixed Interest, 20-35% cash, maximum 80% equities (overseas earners mainly incl. 25%-40% in precious metals stocks, a spread of investment trusts). Much has been discussed recently regarding safe havens and the safety of ETF’s and I continue to avoid these vehicles for private investors as I believe there are major regulatory concerns in this area. The level of the coming correction is the key and I still feel that 10-30% is possible which implies 4,776 (20% from 5,970 recent high) on FTSE100. Looking at what happened in the mid-1930’s it’s interesting to note that US$10,000 invested in DJIA in Oct 1929 would have turned into US$3,600 by Dec 1935 whereas the same amount invested in Homestake Mining, a gold miner, grew to US$62,000 i.e 6.2x. During the 1973/74 slump when stocks depreciated over 50% the large gold cap stocks increased 260%+. If the precious metals shares bull does return then spectacular returns could be achieved in the foreseeable future with some of the gold shares already purchased. Many are suggesting that comparisons are unfair with the ‘30s but history has a funny habit of repeating itself. GFMS, the precious metals research group, have just predicted that a looming flare-up in the Eurozone will propel the price of gold towards $2,000 an ounce this year. Exactly!
“Hasta la vista”…….as Spain (it’s debt dwarfs Greece, Italy and the other fringe players) gets nearer to the markets sights the phrase seems more than appropriate.
Let’s hope that Spring doesn’t disappoint.
Wednesday 18 January 2012
Hello Prime Minister, is anyone in today?
Dear Prime Minister
I'm sure you're getting alot of letters at the moment but I'd appreciate just a minute of your time. You see, I've just seen you standing at the despatch box hammering home to the opposition your parties intent on job creation and presumably job retention. You appear to be very passionate about 'jobs' and if this is true I was wondering why you hadn't bothered to respond to my earlier letter to you dated 18th August 2011 headlined "Financial Tsunami heading for the City of London". It's not that I mind being ignored or indeed being fobbed off after years of dedicated service to my stock exchange colleagues and clients but I would just like to hear your explanation as to why you and your party consider it necessary to force literally '000s out of financial services as a result of a piece of nonsensical doctrine called "The Retail Distribution Review".
What is incredible about this RDR is that so many (perhaps pickled!) new age financial services personnel think that the RDR is just tickedyboo but I can assure you that the swell of a tsunami is brewing somewhere beyond the Thames Estuary. Just like the Poll Tax and the Child Support Agency it is quite clear to many experienced financial services personnel that RDR & all it stands for is going to be nothing short of a major disaster for the City of London.
The confusion surrounding Restricted and Independent advice and service is frankly just a sideshow to the real scandal whereby the FSA are trying to shift the entire investment map towards a 'fee based' system, wiping out in the process '000s of decent honest people in an orwellian examination process which is woefully misguided. Ironically it is the banks and former bankers who have entered the wealth industry who are likely to benefit the most. Perhaps this is deliberate and if so surely someone in charge can spot the dubious futility of allowing bankers another gear change; their record has not been that good to date although admittedly spectacular..
Picture this Prime Minister. If the members of the House were over-regulated, and there are many in UK hoping for something along these lines, and a doctrine was devised whereby you would have to prove to your esteemed colleagues and constituent supporters your professional and public competence so that you would be forced to go back to school, take laborious examinations and be subjected to a humiliating visit to The Job Centre then I suggest you might be as incensed as I am by the current behaviour in the City of London.
Nothing good will come from RDR and by splitting the regulator into four pieces I fear more hydra's will evolve. Meanwhile have some sympathy for the innocent hard working people effected by this, their families and 10's of '000s of clients mesmorised by this appalling arrogance. Democracy and fair play used to be a by-word of how the City used to operate. It also used to be what the old Tory party stood for.
Your once obediant servant,
Richard Hoblyn
I'm sure you're getting alot of letters at the moment but I'd appreciate just a minute of your time. You see, I've just seen you standing at the despatch box hammering home to the opposition your parties intent on job creation and presumably job retention. You appear to be very passionate about 'jobs' and if this is true I was wondering why you hadn't bothered to respond to my earlier letter to you dated 18th August 2011 headlined "Financial Tsunami heading for the City of London". It's not that I mind being ignored or indeed being fobbed off after years of dedicated service to my stock exchange colleagues and clients but I would just like to hear your explanation as to why you and your party consider it necessary to force literally '000s out of financial services as a result of a piece of nonsensical doctrine called "The Retail Distribution Review".
What is incredible about this RDR is that so many (perhaps pickled!) new age financial services personnel think that the RDR is just tickedyboo but I can assure you that the swell of a tsunami is brewing somewhere beyond the Thames Estuary. Just like the Poll Tax and the Child Support Agency it is quite clear to many experienced financial services personnel that RDR & all it stands for is going to be nothing short of a major disaster for the City of London.
The confusion surrounding Restricted and Independent advice and service is frankly just a sideshow to the real scandal whereby the FSA are trying to shift the entire investment map towards a 'fee based' system, wiping out in the process '000s of decent honest people in an orwellian examination process which is woefully misguided. Ironically it is the banks and former bankers who have entered the wealth industry who are likely to benefit the most. Perhaps this is deliberate and if so surely someone in charge can spot the dubious futility of allowing bankers another gear change; their record has not been that good to date although admittedly spectacular..
Picture this Prime Minister. If the members of the House were over-regulated, and there are many in UK hoping for something along these lines, and a doctrine was devised whereby you would have to prove to your esteemed colleagues and constituent supporters your professional and public competence so that you would be forced to go back to school, take laborious examinations and be subjected to a humiliating visit to The Job Centre then I suggest you might be as incensed as I am by the current behaviour in the City of London.
Nothing good will come from RDR and by splitting the regulator into four pieces I fear more hydra's will evolve. Meanwhile have some sympathy for the innocent hard working people effected by this, their families and 10's of '000s of clients mesmorised by this appalling arrogance. Democracy and fair play used to be a by-word of how the City used to operate. It also used to be what the old Tory party stood for.
Your once obediant servant,
Richard Hoblyn
Thursday 5 January 2012
Review 4Q 2011 4th January 2012
“Markets today are ‘one big giant ETF’ (Exchange Traded Fund).” -Joe Saluzzi of Themis Trading in New York on Bloomberg TV 21st December 2011
Over the last few years there has clearly been a disconnect in capital markets between how stocks should behave based on solid earnings numbers and the short-term behaviour of traders and market makers who appear to be often in a different universe to investors and money managers. The interview with Joe Saluzzi confirmed my suspicions that computer generated trading based on algarithms has now created a tail wagging scenario that is unhealthy for capitalism. The interview comments on the thin layer of liquidity in capital markets, the influence of circuit breakers, hyper-second trading, the lack of IPO’s and concludes that another ‘flash crash’ (defined as a quick 10-15 minute correction of >10%) as witnessed on 6th May could indeed occur quite soon. All the hallmarks for this are in place as the world focuses on the EuroZone and its difficulties. But there are, of course, other possible black swan events out there such as Iran or North Korea (some more sabre rattling is predicted with their cousins in the south) as well as a harder landing for China. The year 2011 indeed was a very dark year for investors (even Buffett’s Berkshire Hathaway was -4.7%) but I doubt 2012 will be that different. Of course the thought of 50% of The Beatles (possibly) opening the festivities at the London Olympics might just freshen up investors later in the summer but some nasty events could occur in 1 H 2012.
As I write the bankers at UniCredit in Italy are undertaking a 43% discounted Euros7.5bn rights issue. Their timing surprisingly is quite good as markets are currently looking for some New Year ‘Vim’ (Latin for ‘strength’, hence the old advert adage “Vim gives new strength to your wash”) but of course the real reason relates to what is and has been happening in bond markets over the festive period. Most main parties in the EuroZone have tested the waters ahead of what is likely to be a problematic period. To date Germany, Spain, France & Italy have already issued some bonds ahead of the bigger roll-overs scheduled mainly for February/March. The big question though is whether the current yields of 4-7% offer investors ample reward and whether these roll-overs can get filled. Any further hiccup in the EuroZone could easily send potential investors to the sidelines and continue the Euro’s slide into eventual oblivion. As an aside I saw one shop on my local French channel just last night accepting the ‘old’ french Franc from customers; maybe they know something markets don’t! Again as I write this an email has just dropped in from an institutional contact in Geneva suggesting that Greece has threatened to exit the EuroZone within 3 months unless Euros130billion as promised in October is forthcoming. It’s already hotting up then!
Alot of what has already been discussed throughout 2011 and beforehand is coming to a head. The predicted second banking crisis still appears to be around the corner as especially EuroZone banks try to strengthen their capital ratios ahead of Basle. Sarkozy and Merkel seem to be continuing their dinner dates (much amusement on YouTube) and politics again seems to be taking the spotlight away from the economic reality show. In the EuroZone negative growth is forecast (France 1 Q 12 estimate is -0.1% GDP contraction) whilst in UK a trawl along the bottom is likely as consumers feel the pinch (just look at Next today). The recession continually being discussed in the media appears to be here already. The old derivatives timebomb is still ticking as the global exposure again reaches US$700 trillion. The issues over credit ratings never disappear with France on permanent watch; how long can it be before the 3 main agencies sharpen their swords on France and Spain? There is ,however, some sparkle in the US economy despite the 8.6% official US unemployment rate (15-20% unofficially); the consensus S&P forecast does look encouraging though at +7.2% but these same forecasters got most of their 2011 forecasts hopelessly wrong. Having said that the US$ greenback and markets do provide some short-term protection from the Euro & £sterling although nothing whatsoever tempts me to buy US Treasuries on a yield below 2% (against inflation of circa 4-5%) and a budget deficit of now alarmingly US$15trillion +.
Indeed the only credible and sensible investment themes for 2012 are to continue to buy gold in one form or another, oil shares (I still expect some rotation out of Royal Dutch Shell into BP and other majors at some juncture), Africa and other emerging markets (I particularly like Russia and Brazil in preference to India and China), solid international investment trusts, New Capital Wealthy Nations Bond Fund (over 7%) and up to 25% holding cash (in a mix of currencies in addition to £stg & US$) but avoiding the Euro at all costs. The oil price could be the surprise package this year and could trade in $85-120 range; any fall hereon could well kick start the US economy and ignite already moderately positive US earnings which is why forecasters are bullish. I’m not convinced by this argument though which is why I prefer to remain relatively liquid. Our friends in Iran could well throw a spanner in the works if the current aircraft carrier jibes are anything to be taken seriously…which they are.
It remains to be seen whether the EuroZone, the ECB, the IMF & EFSF (European Financial Stability Fund) et al can work efficiently together and possibly gain enough momentum to raise enough Euros to bail the debtors out, in the right order. It’s possible that up to Euros3trillion could be QE’d but this must be done in cohesion without individual sovereign and bank failures.
With regard to stock selection amongst the oil majors I still continue to look to buy Royal Dutch Shell at closer to £16-20 & BP on dips nearer £4. Amongst oils I like the look of Ophir (having taken over Dominion), Exillion and even possibly Essar provides some value here. Vallares are now Genel and are out of favour in the short-term; more excitement from Hayward and Nat Rothschild though is expected. All the smaller explorers such as Soco, Hardy O&G, Premier Oil and Heritage should start to respond as the year progresses. Amongst gas stories I like Encana at under $20 and notice that there is some impending excitement amongst other Canadian gas plays (Edge Resources is due to arrive on AIM shortly). Elsewhere in FTSE as usual I am extremely cautious although some previous targets to buy at have been reached. I’d prefer to look at BAE Systems nearer 260p, GlaxoSmithKline nearer £13, Sainsbury nearer 265p, HSBC nearer 460p and Standard Chartered nearer £12. My preferred 2011/2012 tip is the inter-dealer/broker Tullett Prebon and at 271p yielding over 5.7% this is still a compelling buy being a possible takeover candidate too. Selectively an investment trust approach seems more prudent and investments in JPMorgan Claverhouse, Henderson Far East, Schroder Oriental, Securities Trust of Scotland and Merchants Trust are still compelling for income investors whereas emerging markets trusts such as JPMorgan India, JPMorgan Brazil, JPMorgan Russia and BlackRock Latin could also be considered. There isn’t a suitable trust for the Final Frontier, Africa so a selected basket of equities is preferred here. In particular I still like Randgold, African Barrick, Afren and Shanta. Elsewhere globally I am still persevering with Patagonia Gold, Orosur, Peninsular and Anglo Pacific remains a classic royalty play that provides some variety. As far as the rest of the UK market is concerned I’m being very selective and prefer international equities.
With sideways volatility again expected during 2012 I continue to encourage portfolio weightings such as 0% Fixed Interest (a bond implosion is forecast), 20-35% cash, maximum 80% equities (overseas earners mainly incl. 25%-40% in precious metals stocks, a spread of investment trusts). Again it’s important to restress that investors are entering an era where stagnant growth (& contraction) in the west could be offset by continued growth in emerging and frontiers markets. The correlation between deflation and inflation needs to be watched closely which is why there’s a growing case for increasing equity exposure especially on any decline across markets. The level of the coming decline is the key and I still feel that 10-30% is possible which implies 4,450 on FTSE100. I think we are about to witness the SPUTNIK MOMENT as has already been predicted. The contrarian view of course is if the EU & US manages to convince markets that a continued bumbling QE practice should be the order of the day. If that happens then expect a much higher S&P and a similar review this time next year predicting the demise of the Euro (again). There are alarming similarities with 1930-1933 which are coming to fruition.
If the Liverpool likely lads do put on a prescribed sensation at the Olympics opening ceremony then Team GB can do no wrong even if no Golds are achieved.
However, 2012 will indeed be a “Long & Winding Road!.......................
Over the last few years there has clearly been a disconnect in capital markets between how stocks should behave based on solid earnings numbers and the short-term behaviour of traders and market makers who appear to be often in a different universe to investors and money managers. The interview with Joe Saluzzi confirmed my suspicions that computer generated trading based on algarithms has now created a tail wagging scenario that is unhealthy for capitalism. The interview comments on the thin layer of liquidity in capital markets, the influence of circuit breakers, hyper-second trading, the lack of IPO’s and concludes that another ‘flash crash’ (defined as a quick 10-15 minute correction of >10%) as witnessed on 6th May could indeed occur quite soon. All the hallmarks for this are in place as the world focuses on the EuroZone and its difficulties. But there are, of course, other possible black swan events out there such as Iran or North Korea (some more sabre rattling is predicted with their cousins in the south) as well as a harder landing for China. The year 2011 indeed was a very dark year for investors (even Buffett’s Berkshire Hathaway was -4.7%) but I doubt 2012 will be that different. Of course the thought of 50% of The Beatles (possibly) opening the festivities at the London Olympics might just freshen up investors later in the summer but some nasty events could occur in 1 H 2012.
As I write the bankers at UniCredit in Italy are undertaking a 43% discounted Euros7.5bn rights issue. Their timing surprisingly is quite good as markets are currently looking for some New Year ‘Vim’ (Latin for ‘strength’, hence the old advert adage “Vim gives new strength to your wash”) but of course the real reason relates to what is and has been happening in bond markets over the festive period. Most main parties in the EuroZone have tested the waters ahead of what is likely to be a problematic period. To date Germany, Spain, France & Italy have already issued some bonds ahead of the bigger roll-overs scheduled mainly for February/March. The big question though is whether the current yields of 4-7% offer investors ample reward and whether these roll-overs can get filled. Any further hiccup in the EuroZone could easily send potential investors to the sidelines and continue the Euro’s slide into eventual oblivion. As an aside I saw one shop on my local French channel just last night accepting the ‘old’ french Franc from customers; maybe they know something markets don’t! Again as I write this an email has just dropped in from an institutional contact in Geneva suggesting that Greece has threatened to exit the EuroZone within 3 months unless Euros130billion as promised in October is forthcoming. It’s already hotting up then!
Alot of what has already been discussed throughout 2011 and beforehand is coming to a head. The predicted second banking crisis still appears to be around the corner as especially EuroZone banks try to strengthen their capital ratios ahead of Basle. Sarkozy and Merkel seem to be continuing their dinner dates (much amusement on YouTube) and politics again seems to be taking the spotlight away from the economic reality show. In the EuroZone negative growth is forecast (France 1 Q 12 estimate is -0.1% GDP contraction) whilst in UK a trawl along the bottom is likely as consumers feel the pinch (just look at Next today). The recession continually being discussed in the media appears to be here already. The old derivatives timebomb is still ticking as the global exposure again reaches US$700 trillion. The issues over credit ratings never disappear with France on permanent watch; how long can it be before the 3 main agencies sharpen their swords on France and Spain? There is ,however, some sparkle in the US economy despite the 8.6% official US unemployment rate (15-20% unofficially); the consensus S&P forecast does look encouraging though at +7.2% but these same forecasters got most of their 2011 forecasts hopelessly wrong. Having said that the US$ greenback and markets do provide some short-term protection from the Euro & £sterling although nothing whatsoever tempts me to buy US Treasuries on a yield below 2% (against inflation of circa 4-5%) and a budget deficit of now alarmingly US$15trillion +.
Indeed the only credible and sensible investment themes for 2012 are to continue to buy gold in one form or another, oil shares (I still expect some rotation out of Royal Dutch Shell into BP and other majors at some juncture), Africa and other emerging markets (I particularly like Russia and Brazil in preference to India and China), solid international investment trusts, New Capital Wealthy Nations Bond Fund (over 7%) and up to 25% holding cash (in a mix of currencies in addition to £stg & US$) but avoiding the Euro at all costs. The oil price could be the surprise package this year and could trade in $85-120 range; any fall hereon could well kick start the US economy and ignite already moderately positive US earnings which is why forecasters are bullish. I’m not convinced by this argument though which is why I prefer to remain relatively liquid. Our friends in Iran could well throw a spanner in the works if the current aircraft carrier jibes are anything to be taken seriously…which they are.
It remains to be seen whether the EuroZone, the ECB, the IMF & EFSF (European Financial Stability Fund) et al can work efficiently together and possibly gain enough momentum to raise enough Euros to bail the debtors out, in the right order. It’s possible that up to Euros3trillion could be QE’d but this must be done in cohesion without individual sovereign and bank failures.
With regard to stock selection amongst the oil majors I still continue to look to buy Royal Dutch Shell at closer to £16-20 & BP on dips nearer £4. Amongst oils I like the look of Ophir (having taken over Dominion), Exillion and even possibly Essar provides some value here. Vallares are now Genel and are out of favour in the short-term; more excitement from Hayward and Nat Rothschild though is expected. All the smaller explorers such as Soco, Hardy O&G, Premier Oil and Heritage should start to respond as the year progresses. Amongst gas stories I like Encana at under $20 and notice that there is some impending excitement amongst other Canadian gas plays (Edge Resources is due to arrive on AIM shortly). Elsewhere in FTSE as usual I am extremely cautious although some previous targets to buy at have been reached. I’d prefer to look at BAE Systems nearer 260p, GlaxoSmithKline nearer £13, Sainsbury nearer 265p, HSBC nearer 460p and Standard Chartered nearer £12. My preferred 2011/2012 tip is the inter-dealer/broker Tullett Prebon and at 271p yielding over 5.7% this is still a compelling buy being a possible takeover candidate too. Selectively an investment trust approach seems more prudent and investments in JPMorgan Claverhouse, Henderson Far East, Schroder Oriental, Securities Trust of Scotland and Merchants Trust are still compelling for income investors whereas emerging markets trusts such as JPMorgan India, JPMorgan Brazil, JPMorgan Russia and BlackRock Latin could also be considered. There isn’t a suitable trust for the Final Frontier, Africa so a selected basket of equities is preferred here. In particular I still like Randgold, African Barrick, Afren and Shanta. Elsewhere globally I am still persevering with Patagonia Gold, Orosur, Peninsular and Anglo Pacific remains a classic royalty play that provides some variety. As far as the rest of the UK market is concerned I’m being very selective and prefer international equities.
With sideways volatility again expected during 2012 I continue to encourage portfolio weightings such as 0% Fixed Interest (a bond implosion is forecast), 20-35% cash, maximum 80% equities (overseas earners mainly incl. 25%-40% in precious metals stocks, a spread of investment trusts). Again it’s important to restress that investors are entering an era where stagnant growth (& contraction) in the west could be offset by continued growth in emerging and frontiers markets. The correlation between deflation and inflation needs to be watched closely which is why there’s a growing case for increasing equity exposure especially on any decline across markets. The level of the coming decline is the key and I still feel that 10-30% is possible which implies 4,450 on FTSE100. I think we are about to witness the SPUTNIK MOMENT as has already been predicted. The contrarian view of course is if the EU & US manages to convince markets that a continued bumbling QE practice should be the order of the day. If that happens then expect a much higher S&P and a similar review this time next year predicting the demise of the Euro (again). There are alarming similarities with 1930-1933 which are coming to fruition.
If the Liverpool likely lads do put on a prescribed sensation at the Olympics opening ceremony then Team GB can do no wrong even if no Golds are achieved.
However, 2012 will indeed be a “Long & Winding Road!.......................
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