Now that we can all sit down, relax and have a comforting cup of tea after the appalling shenanigans in Strasbourg it's important to reflect once more on the perennial leadership contest. Anyway I'm pleased that Steven Woolfe MEP is back sitting up despite nursing a sore left jaw. The perpetrator of this intrusion should be banned from the party forthwith. No investigation, no fuss, just a simple exclusion and expulsion for the culprit.
In the '70s & '80s the England Cricket XI had serious leadership issues itself following the successful captaincy bestowed by Mike Brearley. The selectors stumbled from choosing raw talent to randomly choosing a Captain by placing a tail on a donkey competition. The upshot was that various credible cricket professionals were given the chance of captaining England despite having relatively no experience or idea of what it entailed. Some of the great names of that era failed dismally including David Gower and Sir Ian Botham. When the crisis came to a head the England selectors chose a Kent classroom colleague of mine who by all accounts should have had the job years before. Anyway he was chosen for the 4th & 5th Tests v. WI and the inaugural Test v. Sri Lanka. He was chosen because he, like Brearley and many others from other ages, understood teamwork, tactics and man management,etc. The England soccer team has gone through similar upheavals and arguably with much less success than recent cricketers. So what is the issue (& qualities required) with choosing the right leader for whatever scenario and brief outlined ?
I've thought about this much over the years, usually whilst watching the dynamics of Mainwaring, Wilson & Jones in Dad's Army but I've seen the same dynamics and characteristics with Partners on the London Stock Exchange. Leadership in a nutshell is about being the first over the top (as the old officer classes used to do), taking a firm position, ensuring you're not alone, cajoling all and sundry and ruthlessly ensuring that the game plan is adhered to and the objective gained. Once achieved only then does a Leader gain the respect of those around him. It's the same for a Colonel, as a 2/Lieutenant with a small platoon and the NCO's within that platoon. It's all relative at the end of the day but of course all leaders must be liked and have a sense of fun too.
With politicians these days the basic principles of leadership are often ignored by the MSM and importantly voters. In the last few decades UK has been blessed (sic) with PM's like Major and Brown who had dubious leadership or other good qualities at best. Parties everywhere have had their fair share of failed leaders. Probably the only exception to the rule was Screaming Lord Sutch of MRLP who professed to maintaining clear and concise (& amusing) policies despite few actually voting for him.
So the big issue for UKIP since 23rd June has been - who should be the next UKIP leader ? One candidate has stood out from the pack as yellow as mustard but due to some oversight and politicising within the NEC his application was rejected. The last incumbant was albeit a highly gifted politician and loyal UKIP MEP but failed the litmus test on Leadership qualities.
Let's all think about what Leadership really is. Listening to one's colleagues, party Members and prospective voters is essential but listening to all those opposing a Leader or Party is equally important. The MSM is ruthless in disturbing any contest or campaign. They will unpick any squabble and find any chink. The last incumbant found that out to her cost.
Oh ! What happened to that Kent clasmate. Well, he lost the 4th Test, got injured, never played for England again and more surprisingkly never got sacked as England Captain. Work that one out ! Have you noticed how MSM have tried to make hay about Nigel Farage being back as Interim Leader. Not processing the paperwork properly can often cause this sort of hiccup and many Co Directors over the years have discovered the same to their cost.
Choose well, choose someone with spirit and leadership qualities ! I have.
Thursday, 6 October 2016
Wednesday, 28 September 2016
We are about to witness the death of the EU - Hold on to your hats !
This is my first post on Kipper Central so I am not going to hold back.
I gave NF my vocal support in around 2005 through personal emails and joined the party the day that David Cameron called a 3-line whip during a debate on EU (2011) where Jacob Rees-Mogg first shone a bright light on the threat to democracy from Europe. Things have played out as many UKIP and Old Tories have predicted. My families (Conservative) political connections go back some 500 years when Hoblyn's occupied The Stannary & latterly Westminster ; a forbear, Robert Hoblyn MP Bristol (Con) was once described as the most insignificant MP in the House by a Liberal for warning about the dangers of scaling back defence. Within a few years he was proved right. One thing I have learned from school (I'm afraid I did no work whatsoever) and working on the Stock Exchange is that history has a habit of repeating itself. During this great debt fuelled bull market where borrowers are lauded at the expense of investors & savers and speculators are applauded and worshipped by the MSM and themselves I am reminded of that old Stock Exchange maxim that has been handed down to me through generations. There is NO SUCH THING AS AN EXPERT. Yet today thinkers and doers are ignored and speculators and celebrities are feted everywhere for doing very little and getting just about everything wrong. Of course in a truly democratic free & fair market everything should balance out equally in the end but the Federal Reserve and the banksters who thrive and suckle from this uncontrolled monetary heaven have created a monster that shortly surely will hit the buffers.
I predicted the 2007-2008 crisis like a few others but the next crisis will dwarf the horrors of Bear Stearns, Lehman Bros and the other forgotten casualties. Going into that last crisis the globe had around $25-30 trillion of debt, today it is around a staggering $60 trillion. The MSM & financial journos shrug this off with growth targets and examples of corporate brilliance. The hunger at board level is perhaps personified by Wells Fargo; it's not the only bank with a robber baron culture sad to say. No, the elephant in the room is my old chestnut. I refer to it often as the 'D' word on Twitter. Usually people respond by thinking I am referring to DEBT but the 'D' I am referring is DERIVATIVES.
For those who followed my previous blog on Blogspot - Hoblyn & King (replicated on the Enterprise Britain blog too) the reader may have read the following in June 2007;-
Trading bullion or cash as I once did or even shares as I do now is real whereas trading a basket of derivatives surrounding aesthetic instruments that don't exist is tantamount to disaster. But then a global $370 trillion exposure in derivatives is proof indeed that I may be out of touch as indeed Warren Buffett might be...
That derivative figure has doubled too to around $700-750 trillion. For those who are unaware of what a derivative is think option, warrant, contango, CDS, CDO.....oh yes Goldman Sachs and JP Morgan have created a whole new language in synthetics that often baffles their own boffins. What chance do regulators or ordinary investors have in a world of derivatives and HFT (High Frequency Trading) where nano-seconds makes all the difference ? On 5th November 2008 I wrote;-
There are many observers who have felt that the billions of $, £’s, Yen & Euros that have been raised would have been better deployed to stimulating core industries/sectors rather than bailing out the very banks who often or not catalysed this crisis of confidence. With balance sheets remaining questionable with off-balance sheet positions (debts?) remaining unquantifiable (the derivatives tail is now estimated at US$500 trillion) some market commentators have suggested that these banks didn’t need saving. Arguably new stock banks should have been created but instead governments have suggested that regulations were weak and have demanded more regulation thus making life more difficult for themselves, the banks and broking houses as well as investors going forward. I would argue that less regulation is needed allowing for new organisations to be formulated by entrepreneurs from any ongoing fallout but I fear that the opposite will happen (Sarkozy has called for more regulation along with other more socialist powermongers).
On 5th October 2011 I wrote;-
Of course, no-one knows if a Lehman mark II is imminent but my feeling is that the derivatives timebomb is ticking louder. How much is the global exposure in derivatives? Well it’s estimated at $500-600 trillion via the clearing process but so much is synthetic (socially and financially useless in my opinion) and it doesn’t help that the Bank for Int’l Settlements based in Basle is not exactly transparent with the state of global derivatives against a backdrop of friction amongst the global clearers which is coming to a head according to the FT. So it would appear that the problems now surfacing in the global clearance of derivatives is not that different to the frictions appearing in the EU doctrine as millions are being asked to pay for bailouts. The transaction tax (“tobin”) imposed by the Eurozone can only damage markets and investors hopes in the medium to long term. What perhaps is more alarming is that there are clear divisions between politicians, regulators, central bankers and economists who all appear to be acting in a cartel against the wisdom of markets. This does not bode well.
So we arrive today as Deutsche Bank's derivatives book is coming under scrutiny. Billions of losses are mounting and the global banking system and the German Government have simply nowhere to go. The ECB is paralysed, as is the IMF, and those at Goldman's & JP Morgan must be wondering how they can alleviate the drill down that will occur. When a derivative goes wrong it has UNLIMITED downside in many instances. Since nobody knows the exact nature of the portfolio risk it's impossible to calculate so I'll leave you with this thought.
Deutsche Bank is at the heart of the German economy. It is the dominant bank within the EU. It has the biggest derivatives position in the world. Around $70 TRILLION at the last count but this figure could already be rising as losses accelerate and morph across global markets. Deutsche Bank is the engine room of the EU project.
I had a colleague in 1987 who wrote options on what was then the LTOM (London Traded Options Market). Entering October he & his clients had a £250,000 commitment or exposure. When the market corrected (around 20%) on 19th Oct the margin calls and losses amounted to £2.5million, roughly 10:1. He and his clients were lucky. Gain and loss ratios in derivatives can sometimes be in multiples of 100.
The City of London is at the epicentre of global derivatives. GMT means that London can trade for Tokyo, Beijing, Hong Kong, Singapore, Dubai, Moscow during the same day as New York. If Deutsche blows the City will take alot of the flak as well as the brokerage as the remaining 90% of global derivatives use London to adjust positions. Some losses will be in TRILLIONS, especially if markets correct around 30-70% as some quiet commentators predict.
We are about to witness the death of the EU. Europe will need resuscitation once more but it will be too late for the failed Central Bank QE experiment that has spiralled under a failed REGULATORY doctrine. Hold on to your hats !
More on REGULATION in later blogs if the internet is still operational.
I gave NF my vocal support in around 2005 through personal emails and joined the party the day that David Cameron called a 3-line whip during a debate on EU (2011) where Jacob Rees-Mogg first shone a bright light on the threat to democracy from Europe. Things have played out as many UKIP and Old Tories have predicted. My families (Conservative) political connections go back some 500 years when Hoblyn's occupied The Stannary & latterly Westminster ; a forbear, Robert Hoblyn MP Bristol (Con) was once described as the most insignificant MP in the House by a Liberal for warning about the dangers of scaling back defence. Within a few years he was proved right. One thing I have learned from school (I'm afraid I did no work whatsoever) and working on the Stock Exchange is that history has a habit of repeating itself. During this great debt fuelled bull market where borrowers are lauded at the expense of investors & savers and speculators are applauded and worshipped by the MSM and themselves I am reminded of that old Stock Exchange maxim that has been handed down to me through generations. There is NO SUCH THING AS AN EXPERT. Yet today thinkers and doers are ignored and speculators and celebrities are feted everywhere for doing very little and getting just about everything wrong. Of course in a truly democratic free & fair market everything should balance out equally in the end but the Federal Reserve and the banksters who thrive and suckle from this uncontrolled monetary heaven have created a monster that shortly surely will hit the buffers.
I predicted the 2007-2008 crisis like a few others but the next crisis will dwarf the horrors of Bear Stearns, Lehman Bros and the other forgotten casualties. Going into that last crisis the globe had around $25-30 trillion of debt, today it is around a staggering $60 trillion. The MSM & financial journos shrug this off with growth targets and examples of corporate brilliance. The hunger at board level is perhaps personified by Wells Fargo; it's not the only bank with a robber baron culture sad to say. No, the elephant in the room is my old chestnut. I refer to it often as the 'D' word on Twitter. Usually people respond by thinking I am referring to DEBT but the 'D' I am referring is DERIVATIVES.
For those who followed my previous blog on Blogspot - Hoblyn & King (replicated on the Enterprise Britain blog too) the reader may have read the following in June 2007;-
Trading bullion or cash as I once did or even shares as I do now is real whereas trading a basket of derivatives surrounding aesthetic instruments that don't exist is tantamount to disaster. But then a global $370 trillion exposure in derivatives is proof indeed that I may be out of touch as indeed Warren Buffett might be...
That derivative figure has doubled too to around $700-750 trillion. For those who are unaware of what a derivative is think option, warrant, contango, CDS, CDO.....oh yes Goldman Sachs and JP Morgan have created a whole new language in synthetics that often baffles their own boffins. What chance do regulators or ordinary investors have in a world of derivatives and HFT (High Frequency Trading) where nano-seconds makes all the difference ? On 5th November 2008 I wrote;-
There are many observers who have felt that the billions of $, £’s, Yen & Euros that have been raised would have been better deployed to stimulating core industries/sectors rather than bailing out the very banks who often or not catalysed this crisis of confidence. With balance sheets remaining questionable with off-balance sheet positions (debts?) remaining unquantifiable (the derivatives tail is now estimated at US$500 trillion) some market commentators have suggested that these banks didn’t need saving. Arguably new stock banks should have been created but instead governments have suggested that regulations were weak and have demanded more regulation thus making life more difficult for themselves, the banks and broking houses as well as investors going forward. I would argue that less regulation is needed allowing for new organisations to be formulated by entrepreneurs from any ongoing fallout but I fear that the opposite will happen (Sarkozy has called for more regulation along with other more socialist powermongers).
On 5th October 2011 I wrote;-
Of course, no-one knows if a Lehman mark II is imminent but my feeling is that the derivatives timebomb is ticking louder. How much is the global exposure in derivatives? Well it’s estimated at $500-600 trillion via the clearing process but so much is synthetic (socially and financially useless in my opinion) and it doesn’t help that the Bank for Int’l Settlements based in Basle is not exactly transparent with the state of global derivatives against a backdrop of friction amongst the global clearers which is coming to a head according to the FT. So it would appear that the problems now surfacing in the global clearance of derivatives is not that different to the frictions appearing in the EU doctrine as millions are being asked to pay for bailouts. The transaction tax (“tobin”) imposed by the Eurozone can only damage markets and investors hopes in the medium to long term. What perhaps is more alarming is that there are clear divisions between politicians, regulators, central bankers and economists who all appear to be acting in a cartel against the wisdom of markets. This does not bode well.
So we arrive today as Deutsche Bank's derivatives book is coming under scrutiny. Billions of losses are mounting and the global banking system and the German Government have simply nowhere to go. The ECB is paralysed, as is the IMF, and those at Goldman's & JP Morgan must be wondering how they can alleviate the drill down that will occur. When a derivative goes wrong it has UNLIMITED downside in many instances. Since nobody knows the exact nature of the portfolio risk it's impossible to calculate so I'll leave you with this thought.
Deutsche Bank is at the heart of the German economy. It is the dominant bank within the EU. It has the biggest derivatives position in the world. Around $70 TRILLION at the last count but this figure could already be rising as losses accelerate and morph across global markets. Deutsche Bank is the engine room of the EU project.
I had a colleague in 1987 who wrote options on what was then the LTOM (London Traded Options Market). Entering October he & his clients had a £250,000 commitment or exposure. When the market corrected (around 20%) on 19th Oct the margin calls and losses amounted to £2.5million, roughly 10:1. He and his clients were lucky. Gain and loss ratios in derivatives can sometimes be in multiples of 100.
The City of London is at the epicentre of global derivatives. GMT means that London can trade for Tokyo, Beijing, Hong Kong, Singapore, Dubai, Moscow during the same day as New York. If Deutsche blows the City will take alot of the flak as well as the brokerage as the remaining 90% of global derivatives use London to adjust positions. Some losses will be in TRILLIONS, especially if markets correct around 30-70% as some quiet commentators predict.
We are about to witness the death of the EU. Europe will need resuscitation once more but it will be too late for the failed Central Bank QE experiment that has spiralled under a failed REGULATORY doctrine. Hold on to your hats !
More on REGULATION in later blogs if the internet is still operational.
Friday, 23 September 2016
The London Stock Exchange needs a major overhaul, Prime Minister !
Dear Mrs May
The old Stock Exchange Members book of 1973-74 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 FCA and CISI 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 to 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 has found out by chance over the the last few years. 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 . No, the secret ingredient is "HEART" Mrs. May.
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 government 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, FSA and now FCA already known as "fuCA" ) 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 ISDX 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 FCA doctrine that is called mildly 'The Retail Distribution Review'. Thousands of brokers have been wiped out by this 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 59 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 Mrs. May. 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 (or Commonwealth) taxpayers or workers.
Yours
Richard Hoblyn
The old Stock Exchange Members book of 1973-74 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 FCA and CISI 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 to 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 has found out by chance over the the last few years. 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 . No, the secret ingredient is "HEART" Mrs. May.
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 government 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, FSA and now FCA already known as "fuCA" ) 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 ISDX 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 FCA doctrine that is called mildly 'The Retail Distribution Review'. Thousands of brokers have been wiped out by this 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 59 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 Mrs. May. 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 (or Commonwealth) taxpayers or workers.
Yours
Richard Hoblyn
Friday, 28 March 2014
We're one stop away from EUSSR if we're NOT there already -EUROPEAN DEBATE REVIEW
Like many millions of people globally I was transfixed to my Sky Channel 501 for the #LBCdebate between Nick Clegg and Nigel Farage this week. Like many too I was appalled at the way Sky News chaired and massaged their intended result in the build up and subsequently their extraordinary aspersion that Clegg won the debate BEFORE the polls came in. Like many '000s I tweeted during the debate my views and responses and I reckon by the half-time hurdle Farage had trounced & trumped Clegg completely. Like an enthralling FA Cup Final when the underdog outplays the clear favourite the whole 89 minutes it was conclusive at that stage that the only way Farage could lose momentum and the debate would be if he lost his rag with that apparatchik Deputy PM or make an extraordinary howler as many predicted in the media before the final whistle. He didn't as any sane and intelligent person who has ever seen a debate knows full well. Ferrari of LBC did a pretty good job but I'm sure I wasn't the only person watching who found many of the audiences questions quite lame. A proper debate on these important issues could and should have been put together in advance allowing coherent responses from each of the opposing candidates and ONLY then questions thrown to the audience. Anyway this is a moot point but Farage surprised many in the way he handled himself. When I say many I'm of course referring to those who are not accustomed or aware that the art and technique of debating is part and parcel of the Public School educational system that so many on the left of our politics & media consistently and constantly criticise. As we all saw, it was a clean battle between Dulwich College and their central London neighbours, Westminster School. The Old Alleynians should be proud of their man.
Peter Oborne, the distinguished journalist made reference to the BBC Sky bias in his article so I'm not going to dwell on this further suffice to say that there were 2 important areas within the debate which neither candidate appeared to grasp fully. I should declare my hand as a Member of UKIP here and I suppose then what I'm about to say may be construed as a criticism of Farage's UKIP researchers and speech/debate preparers (whatever they are called these days) but I'm going to comment anyway.
The first point concerns the moment when Ferrari mentioned the Siemens jobs in Hull. What nobody appeared to grasp was the relevance of the question and I'm not sure even Ferrari knew the dynamics here if Farage had been properly coached and given the correct research beforehand (well it was a blind question but this scenario is at the heart of UKIP's argument). Anyway let me refresh for those not old enough to remember.
In 1886 the following event occurred; the UK General Electric Company was created.
GEC traces its origins to G. Binswanger and Company, an electrical goods wholesaler established in London in the 1880s by a German Jewish immigrant Gustav Binswanger (later Gustav Byng).Regarded as the year GEC was founded, 1886 saw a fellow immigrant, Hugo Hirst, join Byng, and the company changed its name to The General Electric Apparatus Company (G. Binswanger).
During the 1980's when Margaret Thatcher was in power Wikipedia record the following;
In April 1981 GEC acquired Cincinnati Electronics (CE),.... CE was a leader in military Radios and Infrared Technology, Space Electronics and other high security products, doing business throughout the world. GEC acquired more U.S. companies Mitel and Picker Corporation, an American manufacturer of medical imaging equipment. It merged Picker with Cambridge Instruments, GEC Medical, and American Optical to form Picker International. GEC Medical was itself an amalgamation of Watson & Sons Ltd - formed in the early 20th Century in London and long a part of GEC, and A E Dean & Co of Croydon. In 1982, it introduced the first 1.0T Magnetic resonance imaging (MRI) unit. In 1998, it acquired the CT division of Elscint Ltd. In 1999 the company changed its name to Marconi Medical Systems. In 2001 Philips Electronics bought Marconi Medical Systems for $1.1 billion. GEC had become Britain's largest and most successful company and private employer, with about ¼M employees in 1983. In 1984 GEC became one of the first 100 companies to enter the FTSE 100 Index, at which time it was ranked third behind British Petroleum and Shell Transport and Trading with a market capitalisation of £4.915 billion and a cash reserve of £5 billion. In 1985 it acquired Yarrow shipbuilders from British Shipbuilders.
In 1988 GEC merged with Plessey Telecommunications.
In 1989 GEC and Siemens formed a joint company, GEC Siemens plc, to take over the Plessey Company. GEC acquired the defence electronics division of Ferranti in 1990 and Vickers Shipbuilding and Engineering Ltd. (VSEL) in 1995.
Lord Weinstock retired as Managing Director in 1996.
After the failure of most of its U.S. acquisitions, GEC began on the road to contraction until its ultimate demise. The cash mountain of £5 billion which Lord Weinstock had built up in the 1980s had all but disappeared through bad management.
The following has just been taken off a quick google search;-
GEC PLESSEY TELECOMMUNICATIONS TO REDUCE WORKFORCE by CBR Staff Writer| 09 May 1988
Peter Oborne, the distinguished journalist made reference to the BBC Sky bias in his article so I'm not going to dwell on this further suffice to say that there were 2 important areas within the debate which neither candidate appeared to grasp fully. I should declare my hand as a Member of UKIP here and I suppose then what I'm about to say may be construed as a criticism of Farage's UKIP researchers and speech/debate preparers (whatever they are called these days) but I'm going to comment anyway.
The first point concerns the moment when Ferrari mentioned the Siemens jobs in Hull. What nobody appeared to grasp was the relevance of the question and I'm not sure even Ferrari knew the dynamics here if Farage had been properly coached and given the correct research beforehand (well it was a blind question but this scenario is at the heart of UKIP's argument). Anyway let me refresh for those not old enough to remember.
In 1886 the following event occurred; the UK General Electric Company was created.
GEC traces its origins to G. Binswanger and Company, an electrical goods wholesaler established in London in the 1880s by a German Jewish immigrant Gustav Binswanger (later Gustav Byng).Regarded as the year GEC was founded, 1886 saw a fellow immigrant, Hugo Hirst, join Byng, and the company changed its name to The General Electric Apparatus Company (G. Binswanger).
During the 1980's when Margaret Thatcher was in power Wikipedia record the following;
In April 1981 GEC acquired Cincinnati Electronics (CE),.... CE was a leader in military Radios and Infrared Technology, Space Electronics and other high security products, doing business throughout the world. GEC acquired more U.S. companies Mitel and Picker Corporation, an American manufacturer of medical imaging equipment. It merged Picker with Cambridge Instruments, GEC Medical, and American Optical to form Picker International. GEC Medical was itself an amalgamation of Watson & Sons Ltd - formed in the early 20th Century in London and long a part of GEC, and A E Dean & Co of Croydon. In 1982, it introduced the first 1.0T Magnetic resonance imaging (MRI) unit. In 1998, it acquired the CT division of Elscint Ltd. In 1999 the company changed its name to Marconi Medical Systems. In 2001 Philips Electronics bought Marconi Medical Systems for $1.1 billion. GEC had become Britain's largest and most successful company and private employer, with about ¼M employees in 1983. In 1984 GEC became one of the first 100 companies to enter the FTSE 100 Index, at which time it was ranked third behind British Petroleum and Shell Transport and Trading with a market capitalisation of £4.915 billion and a cash reserve of £5 billion. In 1985 it acquired Yarrow shipbuilders from British Shipbuilders.
In 1988 GEC merged with Plessey Telecommunications.
In 1989 GEC and Siemens formed a joint company, GEC Siemens plc, to take over the Plessey Company. GEC acquired the defence electronics division of Ferranti in 1990 and Vickers Shipbuilding and Engineering Ltd. (VSEL) in 1995.
Lord Weinstock retired as Managing Director in 1996.
After the failure of most of its U.S. acquisitions, GEC began on the road to contraction until its ultimate demise. The cash mountain of £5 billion which Lord Weinstock had built up in the 1980s had all but disappeared through bad management.
The following has just been taken off a quick google search;-
GEC PLESSEY TELECOMMUNICATIONS TO REDUCE WORKFORCE by CBR Staff Writer| 09 May 1988
GEC Plessey Telecommunications has left the City wondering what was the point of the merger after announcing that System X manufacture will continue at both the highly-automated Plessey plant in Liverpool and at the GEC plant in Coventry, being phased out only at the GEC plant in Kirkcaldy: the group wants to reduce its 23,000-strong workforce by a less-than-expected 1,800 by the end of this year; the Financial Times reckons these will be spread among the three plants mentioned, and also at Plessey's Beeston PABX plant, and at the telephone handset manufacturing plant in Aycliffe, County Durham.
So by now anyone reading this may have deduced that GEC who employed about 250,000 UK people in 1983, faltered and had a large chunk of its operations absorbed into the gigantic Siemens universe after the failure of the GEC Siemens joint venture in 1988-1989. What should really have been discussed surely then is how many people do Siemens employ today in UK (??). If the wind turbine announcement in Hull is anything to go by it looks as if Siemens today employ a lot less than the MMC envisaged in 1988 when the acquisition of Plessey was examined. This is NOT a great argument for job creation in UK by EU businesses who don't have a great track record on employment beyond a relatively short timeframe.
Now moving to my second point which wasn't discussed properly during the #LBCdebate but was hinted at several times. Again this relates to jobs but actually is more to do with protectionism, which perhaps is the elephant in the room which the pro-EU lobby, Sky News et al and most of Fluff Street always fail to examine properly. I have blogged about this in the past but here goes.
Can you name as many EU companies in 1 minute that are operating freely in UK, sometimes have bought FTSE100/250/350 companies?
EDF (various UK utilities)
TotalGaz
Santander
Siemens
how many European banks?
......stop there
Can you name any UK companies that have managed to acquire EU companies listed on the major exchanges across Europe?
.....not many....but I do recollect Wiggins Teape Appleton merging with Arjo becoming Arjo Wiggins some years back and of course there was that failed RBS acquisition of ABN AMRO.
So in truth the UK is adopting an OPEN DOOR policy for businesses and migrants whereas Europe speaks about this but doesn't execute its game plan.
Is it any wonder that UKIP now has 23% support in UK and the number is growing?
Tuesday, 11 March 2014
"There's Gold in
Them Thar Hills"
---Nigel Beynon EDITOR-IN-CHIEF City-Watch.net
MARKETS:
Equity markets in the
UK and US are pretty quiet so far this year, but more new issues are planned.
Firms like Poundland are coming to the market. Silver and Gold are both up quite
a bit, but Copper and Oil are down. This suggests that economies are still
weak, which may explain why central banks, such as the Bank of England, are
trying to keep interest rates low.
STOCKS:
In 1848 the first
California Gold Rush started in Sutter's Creek. About 100 miles away a new one
is happening in Mountain View, just outside San Francisco. This is part of the
world famous 'Silicon Valley'; home to firms like Google. Some of these
companies have awesome financial power, such as Facebook, which is buying
another Valley firm WhatsApp for $19bn. WhatsApp has 450 million active
users and was founded as recently as 2009. That's a very productive 5 years
work! The founders previously worked for Yahoo - another valley firm. So
the old-timer's advice no longer applies; the Gold's no longer in the hills ...
it"s in the Valley.
---Nigel Beynon EDITOR-IN-CHIEF City-Watch.net
Thursday, 19 December 2013
The market in UK is in decline.....40 years examination
On my desk I have a copy of "Members of the London Stock Exchange 1973-74". Forty years on it's pertinent perhaps to do some quick analysis and appraise whether one might consider the market as ALIVE & KICKING or like me (& a minority of others) ON LIFE SUPPORT.
The following firms were attempting to trade through the '74/75 slump;-
(the league table is based on numbers of Partners who maintained 'professional' unlimited personal liability ; note Associates & Attaches are NOT included ----minimum 10 Partners --- I have made a few comments against various and those with blanks do require further research-------all E&OE)
-------------------------------------------------------------
stockbroking
Grieveson Grant & Co 46 (now Dresdner Kleinwort)
James Capel & Co 44 (became HSBC Inv Man)
de Zoete & Bevan 34 (became BZW now Barclays Stockbrokers)
RJ Blackwell 32
Hoare Govett & Co 31 (recently reignited; ex-RBS)
Sheppards & Chase 30 (merged with Carr now Investec)
WJ Greenwell & Co 29 (Midland now part of HSBC)
L Messel 29 (became Shearson Lehman; until 2007)
Cazenove & Co 28 (now JP Morgan & Cazenove Cap Man)
Laurence Prust & Co 28
Panmure Gordon & Co 27 (still active)
Phillips & Drew 27 (now UBS)
Capel-Cure Carden & Co 26 (acquired Myers then ANZ)
Rowe & Pitman 26 (Akroyd & Smithers, Warburg then UBS)
Joseph Sebag & Co 25 (merged with WI Carr; Carr Sebag)
Norris Oakley Richardson & Glover 25
Simon & Coates 23 (acquired by Chase Manhattan)
WI Carr & Sons 22 (merged with Sebag; Carr Sebag)
Laing & Cruickshank 22 (acquired by Credit Lyonnais)
Strauss Turnbull 22 (acquired by Societe Generale)
Kitcat & Aitken 21
EB Savory Milln & Co 21 (5 way merger into Parrish; dissolved 1991)
Fielding Newson & Smith 21 (acquired by NatWest)
Colegrave & Co 20 (merged with Grenfell)
Hedderwick Borthwick & Co 20
George Henderson & Co 20 (merged with Crosthwaite; now Investec)
Buckmaster & Moore 19 (acquired by Credit Suisse)
Stirling & Co 19
Williams de Broe Hill Chaplin 18 (still active)
Pember & Boyle 18
DQ Henriques Seal & Co 18
Laurie Milbank 17 (acquired by Chase Manhattan)
Hoblyn (& King; Dix Maurice) & Co 17 (25 in 1972 ; Hoblyn dissolved October 1974)
Grenfell & Co 17 (merged with Colegrave)
Hichens Harrison & Co 16 (now Religare Hichens Harrison)
Kemp-Gee & Co 16 (merged with Scrimgeour 8 ptnrs then Citigroup SV)
Myers & Co 16 (merged with Capel-Cure then ANZ)
Quilter Hilton Goodison & Co 16 (now Quilter Cheviot ; ex-Commercial Union)
Wise Speke & Co 16 (acquired by Brewin Dolphin)
Vickers da Costa 15 (merged with Scrimgeour into Citigroup)
Brewin & Co 15 (acquired Wontner Dolphin; now Brewin Dolphin)
Cohen de Smitt Greener Dreyfus 15 (merged with Pidgeon)
Hanson & Co 15
Harris Allday Lea & Brooks 15 (still active)
Lyddon & Co 15
McAnally Montgomerie & Co 15
Parsons & Co 15
Read Hurst-Brown & Co 15
Tilney & Co 15
Bell Lawrie Robertson & Co 14 (acquired by Brewin Dolphin)
Irwin & Co 14
Bendon Langton & Co 14
WM Morris & Co 14
Paul R Schweder Miller & Co 14 (still active)
Pidgeon & Co 13 (merged with de Smitt)
Gilbert Elliott & Co 13 (various hybrids; currently mothballed)
Fenn & Crosthwaite 13 (merged with George Henderson; now Investec)
Raphael Robinson & Glyn 13 (merged with Zorn; now Numis)
Rowe Swann & Co 13
JM Finn & Co 12 (JM Finn & finnCap still active)
Beardsley & Co 12 (merged with Bishop then Henderson now Investec)
Henry Cooke Lumsden & Co 12
Earnshaw Haes & Sons 12 (merged with Northcote now Brewin)
Northcote & Co 12 (merged with Earnshaw now Brewin)
Mullens & Co (*Gov Broker) 12 (acquired by SG Warburg, now UBS)
L Powell Dawes & Co 12
Trevor Matthews Carey 11
Rensburg & Co 11 (merged into BWD Secs)
Castello Parsons & Co 11
Duff Stoop & Ross-Munro 11 (merged with TC Coombs; dissolved 1986)
Maguire Roy Marshall & Co 11
Vanderfelt & Co 11
Vivian Gray 10 (acquired by Gerard)
Montague Loebl Stanley & Co 10
Dunkley Marshall & Smithers 10 (5 way merger into Parrish; dissolved 1991)
Galloway & Pearson 10 (acquired by money-broker Exco)
Keith Bayley Carroll 10 (now KBR corporate finance boutique; ex-WC)
AJ Pryn & Co 10
Harold Rattle & Co 10
Scott Goff Hancock & Co 10 (merged with Duff Stoop; then Coombs; dissolved)
Carlesbach Scott Young 10
Sternberg Flower & Co 10 (5 way merger into Parrish; dissolved 1991)
Tustan L'Estrange 10 (hammered 1975)
Wontner Dolphin & Francis 10 (merged with Brewin)
Zorn Leigh & Hunt 10 (merged with Raphael; now Numis)
stockjobbing
Smith Brothers 36 (now BA Merrill Lynch)
Pinchin Denny 35
Wedd Durlacher 11
Akroyd & Smithers 7
Wedd & Owen 5
In 1974 there were approx. 4,900 individual Members of the Stock Exchange (only 3,000 approx. for Big Bang) represented by approx.400 firms (c.250 for Big Bang). As the fallout from the 3 day week, extraordinary high income tax (together with an investment income surcharge) approaching 98% and a bout of mergers and dissolutions took their toll the absorption and consolidation continued through the 1980's, accelerated through 'Big Bang' in 1986, the crashes of 1987, 2000 and 2007/8 to the arrival of the Retail Distribution Review which came into effect on 1st January 2013. The RDR intent was to perform a 'professional' miracle regarding the distribution of financial products and to make the pricing more competitive.
In 1974 many of the smaller, often regional, firms ironically managed to survive (albeit the failure rate was high despite there being no external regulation to worry about) through all the ups & downs, etc. Notably the following firms caught my eye in the "Members..." book of 1973-74;-
Foster & Braithwaite 8
Charles Stanley 8 (still active)
Fuller & Co 7 (dissolved; now absorbed into Walker Crips)
Astaire & Co 7 (muddled through; became Blue Oar; dissolved)
Halliday Simpson & Co 7 (infamously hammered c.1975)
Walker Crips Weddle Beck 6 (still active)
Shaw & Co 5 (acquired by MeesPierson then Chas.Stanley)
SP Angel 3 (now a Corporate Finance/Broking boutique)
Redmayne-Bentley 3 (still active)
WH Ireland 2 (still active)
It seems to me that the current farcical state of REGULATION is only going to make matters worse for existing firms not only in the retail space but also generally across other areas. In recent years a plethora of CFD trading firms have entered the market and yet none appear to making any impact on 'real' investment. The strange and melancholy shift away from 'wealth creation' which ALL of the above firms prospered or failed through has been replaced by a cynical 'wealth' approach ONLY intent on extracting fees from investors and perversely reducing risk, which anyone with proper knowledge and experience knows full well can never work (real world!). An Enterprise Britain executive mentioned to me a recent FCA applicant having to revise his application & presumably business plan an incredible 19 times; I'm not sure anyone with market acumen can tolerate this sort of compulsive inquisitional approach indefinitely. A former partner of mine in the '90s deemed that ALL working in compliance functions (& they have mushroomed substantially since then) should be referred to as the DPU*. I'll come back to this in a moment.
LIQUIDITY always seem to be the buzz word when anyone in authority uses an (any) excuse to tinker with the REGULATOR, the EXCHANGE, etc. This LIQUIDITY motif has been joined by INTEGRITY, FAIRNESS, TRANSPARENCY and a whole host of modern non-sensical terminologies which taken individually rarely (repeat 'rarely') makes the lives of market professionals and investors any easier. The UK used to be a great place to do business but it is increasingly becoming cumbersome and awkward.
Have you noticed that every time one turns on TV, the internet or one reads a paper, online/mobile piece the latest misused word "EXPERT" arrives to inform us of the obvious or as sometimes happens, the irrelevant?
An old market adage long forgotten which I'd like to (sorry if I'm being repetitive) reinforce today is that...."THERE IS NO SUCH THING AS AN EXPERT". Yup you got it in one!
Essentially there's an OLD belief that qualification, education and experience obtained through apprenticeship and practicalities can never turn one into an EXPERT. When I was a young man I was often referred to as a KNOW IT ALL but despite all my misgivings I never referred to myself as an expert and NEVER have to this day. Whenever I speak to someone on market matters or other subjects which I like to think that I have some knowledge of I always say that I have 'specialist' knowledge on the given subject or that I have done considerable 'research' into the area discussed.
So there we have it. Today in capital markets, the media, and in a host of other areas, the UK is full of "experts". But in truth the UK today is split between the "doers" and "don't doers". As you can gather I'm in the "doer" camp with the DPU* representing the other side. If you want to do something or get someone to do something one locates a "doer" but regrettably the "don't doers" are prevailing today in mass market destruction.
* the DEALING PREVENTION UNIT
Just look at the 1973-74 list! This is only the tip of the iceberg and this problem prevails across many professions and industries. Bankers want to sell products, lawyers want to become investment managers, accountants don't know what they want to do but rarely offer to do anything they're paid to do, new age brokers no longer broke shares but manage 'wealth' for an undeserved fee (I've seen this first hand as many Hoblyn & King portfolios are now being managed by broking firms that create nothing but take fees for this charade)...the rest is pretty obvious.
Going back to the 1973-74 lists that I've created from the "Members.." book it seems to me that out of 400 or so firms, 40 years ago, to have 13+ firms still standing in the market today begs a few questions.
No doubt there have been quite a few brokers who have pocketed millions from the various sales, acquisitions, further sales but through this period whilst everyone has participated in the greatest rally ever one would suppose that a few boutiques would have blossomed incredibly. I can think of a few success stories, Killik, Hargreaves Lansdown, Collins Stewart, Evolution, Monument and a host of corporate broking boutiques off the top of my head but I'm struggling to gather pace to enable me to constitute a 2014 league table of the finest and fittest. Virtually all of those listed on '73-74 table survived WW1, the Depression, WW2, the post war slump,etc so it would appear that the real cause of the decline in broking has a lot more to do with RED TAPE than many imagine.
Just in the last year more firms have been rubbed out; Pritchard's, Fyshe Horton Finney and Seymour Pierce. For the life of me I cannot see any new firms operating in this space in the near term.
Everyone likes to comment on LIQUIDITY, perhaps profess to be an EXPERT in these matters but it has long been my belief that LIQUIDITY is a function of the level and amount of participants that there are in the market. The market or exchange is long due an overhaul and many more boutiques are required with soft touch regulation if London is to survive as a place to do business. A Secondary Market perhaps is long overdue too representing just the interests of British companies and workers. The AIM seems to be regaining some traction but has many incremental weaknesses which need ironing out, not least of which is adviser over-charging (duplication even) and absurd liquidity.
Personally I'd like to see a return to personal unlimited liability and firms being created for this alone. Having LLP's, Limited Co's and PLC's/Inc's in the space when no-one is taking any liability is bad business for the UK tax payer.
Surely a few thousand self-employed, empowered, fully liable stockbroking Partnerships would do the market a great service right now.
But NOT if everyone has to undergo 19 revisions and counting!
The following firms were attempting to trade through the '74/75 slump;-
(the league table is based on numbers of Partners who maintained 'professional' unlimited personal liability ; note Associates & Attaches are NOT included ----minimum 10 Partners --- I have made a few comments against various and those with blanks do require further research-------all E&OE)
-------------------------------------------------------------
stockbroking
Grieveson Grant & Co 46 (now Dresdner Kleinwort)
James Capel & Co 44 (became HSBC Inv Man)
de Zoete & Bevan 34 (became BZW now Barclays Stockbrokers)
RJ Blackwell 32
Hoare Govett & Co 31 (recently reignited; ex-RBS)
Sheppards & Chase 30 (merged with Carr now Investec)
WJ Greenwell & Co 29 (Midland now part of HSBC)
L Messel 29 (became Shearson Lehman; until 2007)
Cazenove & Co 28 (now JP Morgan & Cazenove Cap Man)
Laurence Prust & Co 28
Panmure Gordon & Co 27 (still active)
Phillips & Drew 27 (now UBS)
Capel-Cure Carden & Co 26 (acquired Myers then ANZ)
Rowe & Pitman 26 (Akroyd & Smithers, Warburg then UBS)
Joseph Sebag & Co 25 (merged with WI Carr; Carr Sebag)
Norris Oakley Richardson & Glover 25
Simon & Coates 23 (acquired by Chase Manhattan)
WI Carr & Sons 22 (merged with Sebag; Carr Sebag)
Laing & Cruickshank 22 (acquired by Credit Lyonnais)
Strauss Turnbull 22 (acquired by Societe Generale)
Kitcat & Aitken 21
EB Savory Milln & Co 21 (5 way merger into Parrish; dissolved 1991)
Fielding Newson & Smith 21 (acquired by NatWest)
Colegrave & Co 20 (merged with Grenfell)
Hedderwick Borthwick & Co 20
George Henderson & Co 20 (merged with Crosthwaite; now Investec)
Buckmaster & Moore 19 (acquired by Credit Suisse)
Stirling & Co 19
Williams de Broe Hill Chaplin 18 (still active)
Pember & Boyle 18
DQ Henriques Seal & Co 18
Laurie Milbank 17 (acquired by Chase Manhattan)
Hoblyn (& King; Dix Maurice) & Co 17 (25 in 1972 ; Hoblyn dissolved October 1974)
Grenfell & Co 17 (merged with Colegrave)
Hichens Harrison & Co 16 (now Religare Hichens Harrison)
Kemp-Gee & Co 16 (merged with Scrimgeour 8 ptnrs then Citigroup SV)
Myers & Co 16 (merged with Capel-Cure then ANZ)
Quilter Hilton Goodison & Co 16 (now Quilter Cheviot ; ex-Commercial Union)
Wise Speke & Co 16 (acquired by Brewin Dolphin)
Vickers da Costa 15 (merged with Scrimgeour into Citigroup)
Brewin & Co 15 (acquired Wontner Dolphin; now Brewin Dolphin)
Cohen de Smitt Greener Dreyfus 15 (merged with Pidgeon)
Hanson & Co 15
Harris Allday Lea & Brooks 15 (still active)
Lyddon & Co 15
McAnally Montgomerie & Co 15
Parsons & Co 15
Read Hurst-Brown & Co 15
Tilney & Co 15
Bell Lawrie Robertson & Co 14 (acquired by Brewin Dolphin)
Irwin & Co 14
Bendon Langton & Co 14
WM Morris & Co 14
Paul R Schweder Miller & Co 14 (still active)
Pidgeon & Co 13 (merged with de Smitt)
Gilbert Elliott & Co 13 (various hybrids; currently mothballed)
Fenn & Crosthwaite 13 (merged with George Henderson; now Investec)
Raphael Robinson & Glyn 13 (merged with Zorn; now Numis)
Rowe Swann & Co 13
JM Finn & Co 12 (JM Finn & finnCap still active)
Beardsley & Co 12 (merged with Bishop then Henderson now Investec)
Henry Cooke Lumsden & Co 12
Earnshaw Haes & Sons 12 (merged with Northcote now Brewin)
Northcote & Co 12 (merged with Earnshaw now Brewin)
Mullens & Co (*Gov Broker) 12 (acquired by SG Warburg, now UBS)
L Powell Dawes & Co 12
Trevor Matthews Carey 11
Rensburg & Co 11 (merged into BWD Secs)
Castello Parsons & Co 11
Duff Stoop & Ross-Munro 11 (merged with TC Coombs; dissolved 1986)
Maguire Roy Marshall & Co 11
Vanderfelt & Co 11
Vivian Gray 10 (acquired by Gerard)
Montague Loebl Stanley & Co 10
Dunkley Marshall & Smithers 10 (5 way merger into Parrish; dissolved 1991)
Galloway & Pearson 10 (acquired by money-broker Exco)
Keith Bayley Carroll 10 (now KBR corporate finance boutique; ex-WC)
AJ Pryn & Co 10
Harold Rattle & Co 10
Scott Goff Hancock & Co 10 (merged with Duff Stoop; then Coombs; dissolved)
Carlesbach Scott Young 10
Sternberg Flower & Co 10 (5 way merger into Parrish; dissolved 1991)
Tustan L'Estrange 10 (hammered 1975)
Wontner Dolphin & Francis 10 (merged with Brewin)
Zorn Leigh & Hunt 10 (merged with Raphael; now Numis)
stockjobbing
Smith Brothers 36 (now BA Merrill Lynch)
Pinchin Denny 35
Wedd Durlacher 11
Akroyd & Smithers 7
Wedd & Owen 5
In 1974 there were approx. 4,900 individual Members of the Stock Exchange (only 3,000 approx. for Big Bang) represented by approx.400 firms (c.250 for Big Bang). As the fallout from the 3 day week, extraordinary high income tax (together with an investment income surcharge) approaching 98% and a bout of mergers and dissolutions took their toll the absorption and consolidation continued through the 1980's, accelerated through 'Big Bang' in 1986, the crashes of 1987, 2000 and 2007/8 to the arrival of the Retail Distribution Review which came into effect on 1st January 2013. The RDR intent was to perform a 'professional' miracle regarding the distribution of financial products and to make the pricing more competitive.
In 1974 many of the smaller, often regional, firms ironically managed to survive (albeit the failure rate was high despite there being no external regulation to worry about) through all the ups & downs, etc. Notably the following firms caught my eye in the "Members..." book of 1973-74;-
Foster & Braithwaite 8
Charles Stanley 8 (still active)
Fuller & Co 7 (dissolved; now absorbed into Walker Crips)
Astaire & Co 7 (muddled through; became Blue Oar; dissolved)
Halliday Simpson & Co 7 (infamously hammered c.1975)
Walker Crips Weddle Beck 6 (still active)
Shaw & Co 5 (acquired by MeesPierson then Chas.Stanley)
SP Angel 3 (now a Corporate Finance/Broking boutique)
Redmayne-Bentley 3 (still active)
WH Ireland 2 (still active)
It seems to me that the current farcical state of REGULATION is only going to make matters worse for existing firms not only in the retail space but also generally across other areas. In recent years a plethora of CFD trading firms have entered the market and yet none appear to making any impact on 'real' investment. The strange and melancholy shift away from 'wealth creation' which ALL of the above firms prospered or failed through has been replaced by a cynical 'wealth' approach ONLY intent on extracting fees from investors and perversely reducing risk, which anyone with proper knowledge and experience knows full well can never work (real world!). An Enterprise Britain executive mentioned to me a recent FCA applicant having to revise his application & presumably business plan an incredible 19 times; I'm not sure anyone with market acumen can tolerate this sort of compulsive inquisitional approach indefinitely. A former partner of mine in the '90s deemed that ALL working in compliance functions (& they have mushroomed substantially since then) should be referred to as the DPU*. I'll come back to this in a moment.
LIQUIDITY always seem to be the buzz word when anyone in authority uses an (any) excuse to tinker with the REGULATOR, the EXCHANGE, etc. This LIQUIDITY motif has been joined by INTEGRITY, FAIRNESS, TRANSPARENCY and a whole host of modern non-sensical terminologies which taken individually rarely (repeat 'rarely') makes the lives of market professionals and investors any easier. The UK used to be a great place to do business but it is increasingly becoming cumbersome and awkward.
Have you noticed that every time one turns on TV, the internet or one reads a paper, online/mobile piece the latest misused word "EXPERT" arrives to inform us of the obvious or as sometimes happens, the irrelevant?
An old market adage long forgotten which I'd like to (sorry if I'm being repetitive) reinforce today is that...."THERE IS NO SUCH THING AS AN EXPERT". Yup you got it in one!
Essentially there's an OLD belief that qualification, education and experience obtained through apprenticeship and practicalities can never turn one into an EXPERT. When I was a young man I was often referred to as a KNOW IT ALL but despite all my misgivings I never referred to myself as an expert and NEVER have to this day. Whenever I speak to someone on market matters or other subjects which I like to think that I have some knowledge of I always say that I have 'specialist' knowledge on the given subject or that I have done considerable 'research' into the area discussed.
So there we have it. Today in capital markets, the media, and in a host of other areas, the UK is full of "experts". But in truth the UK today is split between the "doers" and "don't doers". As you can gather I'm in the "doer" camp with the DPU* representing the other side. If you want to do something or get someone to do something one locates a "doer" but regrettably the "don't doers" are prevailing today in mass market destruction.
* the DEALING PREVENTION UNIT
Just look at the 1973-74 list! This is only the tip of the iceberg and this problem prevails across many professions and industries. Bankers want to sell products, lawyers want to become investment managers, accountants don't know what they want to do but rarely offer to do anything they're paid to do, new age brokers no longer broke shares but manage 'wealth' for an undeserved fee (I've seen this first hand as many Hoblyn & King portfolios are now being managed by broking firms that create nothing but take fees for this charade)...the rest is pretty obvious.
Going back to the 1973-74 lists that I've created from the "Members.." book it seems to me that out of 400 or so firms, 40 years ago, to have 13+ firms still standing in the market today begs a few questions.
No doubt there have been quite a few brokers who have pocketed millions from the various sales, acquisitions, further sales but through this period whilst everyone has participated in the greatest rally ever one would suppose that a few boutiques would have blossomed incredibly. I can think of a few success stories, Killik, Hargreaves Lansdown, Collins Stewart, Evolution, Monument and a host of corporate broking boutiques off the top of my head but I'm struggling to gather pace to enable me to constitute a 2014 league table of the finest and fittest. Virtually all of those listed on '73-74 table survived WW1, the Depression, WW2, the post war slump,etc so it would appear that the real cause of the decline in broking has a lot more to do with RED TAPE than many imagine.
Just in the last year more firms have been rubbed out; Pritchard's, Fyshe Horton Finney and Seymour Pierce. For the life of me I cannot see any new firms operating in this space in the near term.
Everyone likes to comment on LIQUIDITY, perhaps profess to be an EXPERT in these matters but it has long been my belief that LIQUIDITY is a function of the level and amount of participants that there are in the market. The market or exchange is long due an overhaul and many more boutiques are required with soft touch regulation if London is to survive as a place to do business. A Secondary Market perhaps is long overdue too representing just the interests of British companies and workers. The AIM seems to be regaining some traction but has many incremental weaknesses which need ironing out, not least of which is adviser over-charging (duplication even) and absurd liquidity.
Personally I'd like to see a return to personal unlimited liability and firms being created for this alone. Having LLP's, Limited Co's and PLC's/Inc's in the space when no-one is taking any liability is bad business for the UK tax payer.
Surely a few thousand self-employed, empowered, fully liable stockbroking Partnerships would do the market a great service right now.
But NOT if everyone has to undergo 19 revisions and counting!
Tuesday, 2 April 2013
How capital markets firms got established and operated before the era of regulation
In February I managed to blag (so I'm blogging it now) my way to the London Hilton for a conference entitled "European Family Office Conference". The cost was almost $3,000 but I managed a freebie less my cost to get there which itself was quite cumbersome.
The opening panel tried to define "Family Office" (F.O.) and this in itself threw open a few interesting descriptions. There are two types of F.O.'s. Some are SINGLE F.O.'s whilst others call themselves MULTI F.O.'s---the latter seem to model themselves more on new age WEALTH MANAGERS and pride themselves in sophisticated platforms.
The Victorians used to build sophisticated railway stations on this basis which is why the internal architecture at Waterloo, Charing Cross, Paddington, King's Cross, Liverpool Street etc all appear to look the same.The rail services thus are pretty similar too as are the fares and rude Revenue inspectors (my experience). It seems that many WEALTH MANAGERS are replicating in the same way.
Some F.O's had chosen to become REGULATED but it didn't seem to matter that many had managed to delay the inevitable.
During one of the coffee breaks I remarked to a fellow delegate (I felt like a EU Commissioner at this point) that I wondered how many people working in F.O.'s had considered that their enterprises were in many ways replicating (repetition) the way that many banks and firms of stockbrokers had started up in 18th & 19th centuries. The reaction from the first delegate was strange. He hadn't considered it as today F.O's according to him were doing something new. Similar conversations ultimately repeated.
On the old London Stock Exchange, referred at the time as The Stock Exchange, London EC2 many of the household names some still around today started up as Unlimited Liability Partnerships with one or as many as forty partners all applying for membership of the exchange which itself was truly regulated by a council. If there were any wrong 'uns they were initially given a slap on the wrist but if there were any repetitions then severe penalties could have been handed out.
The members books of the 1870's to 1900's were full of names that made it to the 1970's period when around 50 firms closed their doors and many more made it to 1986 when 'Big Bang' arrived. A few lucky ones were bought by banks heralding the current age of dominant proprietary banks trading their balance sheets but since then around 200 firms (all partnerships initially) have been absorbed by larger firms, banks and those that have converted themselves to 'wealth' managers.The excessive red tape, regulation, demands on capital ratios (Basle I, II & III), technological developments, broadening of synthetic and socially useless products, extra volatilty and a host of other reasons have forced these firms out of business. In the last 18 months Pritchards (evolved out of Dunkley Marshall), Seymour Pierce (a very respected name on the exchange with an historic penchant for water and perks) and just last week Fyshe Horton have closed their doors. Assuming it is fair to say that the period from 1980 until 2000 and arguably 2007/8 heralded the greatest bull market in history it does seem illogical to reflect that such a high percentage of firms focused on private client investing ultimately closed their doors when it's common knowledge that many provided excellent bespoke services. The main common denominator for closure was cited as 'excessive regulation'. This may surprise many who are supportive of so called 'external regulation' but this is the truth. Regulation is not a British invention when it comes to 'stocks & shares' and investing. It's arguable that this grave error embarked upon by Thatcher and her City specialist, Cecil Parkinson (he came around for lunch at Beardsley's in the early '80's and thoroughly unimpressed some) in the mid 80's came through the back door of the then Common Market and was based on german banking oversight but this is only conjecture. One thing is for certain is that despite the political and unparalleled view that the great bull enhanced wider share ownership the opposite possibly happened as firms were at times forcibly closing their doors. There have been a few success stories in the private sphere to balance the argument such as Killik, Hargreaves Lansdown (are they brokers or product suppliers and distributors?) and those that have been massaging 'wealth' through their efforts within the more recent RDR. These firms, like many others that have evolved from other areas of finance, cannot though argue their case for wealth creation or risk taking which is what any member firm should applaud. The almost total disconnect today between the City and the UK economy (even the FTSE is mainly overseas earnings led) and the new RDR driven market will simply NOT create the right kind of environment for SME, small-cap & micro-cap investing that the old UK market formally embraced due to the modern risk and suitability rules.
But there is one thing which no-one appears to have noticed.
Back in the 80's ALL the market investing and trading was executed by people with MARKET EXPERIENCE. Looking around the F.O. conference I guaged that possibly 70% of those present had NO to LIMITED practical capital markets experience. The lack of incisive questions or questions at all directed at the panellists was alarming. Perhaps this is the result of the rise of the 'collective' over direct EQUITY and possibly the fact that regulation and CPD and such like dominates proceedings everywhere in the new City. This trend is not just found clearly in the F.O. arena but I suspect (I've spoken to many across all aspects of the now fragmented market and none disagree with my analysis) also in Hedge Funds, Institutional Fund Management and all aspects to private 'wealth' which has just about pidgeon-holed almost everything in financial services.
The Drury Report covers many ways that UK government can improve and repair the investing environment for private investors but the real culprit has been the demise of the once great exchange that embraced share ownership with a direct connect to companies traded. Many of the regulatory supported investment and trading operations and ideas created since 'Big Bang' only support the City interests rather than Industry as a whole. The recent scrapping of Stamp Duty for AIM stocks albeit a good idea misses one important point. If brokers are no longer being encouraged to support this end of the market due to new age risk and suitability rules then the tax incentive will be lost to many.
Looking at the executives running the new replacement regulator, Financial Conduct Authority (FCA) I cannot believe that I'm the only one who has noticed the appalling lack of market knowledge at the VERY highest level.
Since June when I left the exchange due to my abhorence of RDR I have tried to engage with many about these fears but in my view (for record I worked across markets for 36 years and personally conducted over 40,000 investment trades so I think I have some knowledge) it is imperative for the UK economy and its overseas interests to reflect on what assisted the growth of the economy since the Industrial Revolution. In simple terms it was a MARKET or more importantly an EXCHANGE that understood its raison d'etre for existing with practitioners who knew what it meant to operate within a market. I regret to say that many of my former colleagues and counterparties simply had NO interest in anything other than the trade and the short-term profit deriving from it...all ably supported by pointless and aimless compliance personnel representing the vested interests of the regulators, the executives in many of the surviving firms and their allies ---and there are many!
I believe passionately that a fair and well oiled UK economy must be supported by an exchange free of external regulation, with unlimited liability for practitioners who in return are FREE to operate in proper equity, bonds and physical derivatives, all bound together by a RULE BOOK similar to the old YELLOW BOOK that operated for over 150 years.
The current breed of regulators appear to be making alot up as they go along!
The opening panel tried to define "Family Office" (F.O.) and this in itself threw open a few interesting descriptions. There are two types of F.O.'s. Some are SINGLE F.O.'s whilst others call themselves MULTI F.O.'s---the latter seem to model themselves more on new age WEALTH MANAGERS and pride themselves in sophisticated platforms.
The Victorians used to build sophisticated railway stations on this basis which is why the internal architecture at Waterloo, Charing Cross, Paddington, King's Cross, Liverpool Street etc all appear to look the same.The rail services thus are pretty similar too as are the fares and rude Revenue inspectors (my experience). It seems that many WEALTH MANAGERS are replicating in the same way.
Some F.O's had chosen to become REGULATED but it didn't seem to matter that many had managed to delay the inevitable.
During one of the coffee breaks I remarked to a fellow delegate (I felt like a EU Commissioner at this point) that I wondered how many people working in F.O.'s had considered that their enterprises were in many ways replicating (repetition) the way that many banks and firms of stockbrokers had started up in 18th & 19th centuries. The reaction from the first delegate was strange. He hadn't considered it as today F.O's according to him were doing something new. Similar conversations ultimately repeated.
On the old London Stock Exchange, referred at the time as The Stock Exchange, London EC2 many of the household names some still around today started up as Unlimited Liability Partnerships with one or as many as forty partners all applying for membership of the exchange which itself was truly regulated by a council. If there were any wrong 'uns they were initially given a slap on the wrist but if there were any repetitions then severe penalties could have been handed out.
The members books of the 1870's to 1900's were full of names that made it to the 1970's period when around 50 firms closed their doors and many more made it to 1986 when 'Big Bang' arrived. A few lucky ones were bought by banks heralding the current age of dominant proprietary banks trading their balance sheets but since then around 200 firms (all partnerships initially) have been absorbed by larger firms, banks and those that have converted themselves to 'wealth' managers.The excessive red tape, regulation, demands on capital ratios (Basle I, II & III), technological developments, broadening of synthetic and socially useless products, extra volatilty and a host of other reasons have forced these firms out of business. In the last 18 months Pritchards (evolved out of Dunkley Marshall), Seymour Pierce (a very respected name on the exchange with an historic penchant for water and perks) and just last week Fyshe Horton have closed their doors. Assuming it is fair to say that the period from 1980 until 2000 and arguably 2007/8 heralded the greatest bull market in history it does seem illogical to reflect that such a high percentage of firms focused on private client investing ultimately closed their doors when it's common knowledge that many provided excellent bespoke services. The main common denominator for closure was cited as 'excessive regulation'. This may surprise many who are supportive of so called 'external regulation' but this is the truth. Regulation is not a British invention when it comes to 'stocks & shares' and investing. It's arguable that this grave error embarked upon by Thatcher and her City specialist, Cecil Parkinson (he came around for lunch at Beardsley's in the early '80's and thoroughly unimpressed some) in the mid 80's came through the back door of the then Common Market and was based on german banking oversight but this is only conjecture. One thing is for certain is that despite the political and unparalleled view that the great bull enhanced wider share ownership the opposite possibly happened as firms were at times forcibly closing their doors. There have been a few success stories in the private sphere to balance the argument such as Killik, Hargreaves Lansdown (are they brokers or product suppliers and distributors?) and those that have been massaging 'wealth' through their efforts within the more recent RDR. These firms, like many others that have evolved from other areas of finance, cannot though argue their case for wealth creation or risk taking which is what any member firm should applaud. The almost total disconnect today between the City and the UK economy (even the FTSE is mainly overseas earnings led) and the new RDR driven market will simply NOT create the right kind of environment for SME, small-cap & micro-cap investing that the old UK market formally embraced due to the modern risk and suitability rules.
But there is one thing which no-one appears to have noticed.
Back in the 80's ALL the market investing and trading was executed by people with MARKET EXPERIENCE. Looking around the F.O. conference I guaged that possibly 70% of those present had NO to LIMITED practical capital markets experience. The lack of incisive questions or questions at all directed at the panellists was alarming. Perhaps this is the result of the rise of the 'collective' over direct EQUITY and possibly the fact that regulation and CPD and such like dominates proceedings everywhere in the new City. This trend is not just found clearly in the F.O. arena but I suspect (I've spoken to many across all aspects of the now fragmented market and none disagree with my analysis) also in Hedge Funds, Institutional Fund Management and all aspects to private 'wealth' which has just about pidgeon-holed almost everything in financial services.
The Drury Report covers many ways that UK government can improve and repair the investing environment for private investors but the real culprit has been the demise of the once great exchange that embraced share ownership with a direct connect to companies traded. Many of the regulatory supported investment and trading operations and ideas created since 'Big Bang' only support the City interests rather than Industry as a whole. The recent scrapping of Stamp Duty for AIM stocks albeit a good idea misses one important point. If brokers are no longer being encouraged to support this end of the market due to new age risk and suitability rules then the tax incentive will be lost to many.
Looking at the executives running the new replacement regulator, Financial Conduct Authority (FCA) I cannot believe that I'm the only one who has noticed the appalling lack of market knowledge at the VERY highest level.
Since June when I left the exchange due to my abhorence of RDR I have tried to engage with many about these fears but in my view (for record I worked across markets for 36 years and personally conducted over 40,000 investment trades so I think I have some knowledge) it is imperative for the UK economy and its overseas interests to reflect on what assisted the growth of the economy since the Industrial Revolution. In simple terms it was a MARKET or more importantly an EXCHANGE that understood its raison d'etre for existing with practitioners who knew what it meant to operate within a market. I regret to say that many of my former colleagues and counterparties simply had NO interest in anything other than the trade and the short-term profit deriving from it...all ably supported by pointless and aimless compliance personnel representing the vested interests of the regulators, the executives in many of the surviving firms and their allies ---and there are many!
I believe passionately that a fair and well oiled UK economy must be supported by an exchange free of external regulation, with unlimited liability for practitioners who in return are FREE to operate in proper equity, bonds and physical derivatives, all bound together by a RULE BOOK similar to the old YELLOW BOOK that operated for over 150 years.
The current breed of regulators appear to be making alot up as they go along!
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