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).

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!

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!!