Welcome to ZOMBIEVILLE

Since my last post in December I haven't posted a blog either on Enterprise Britain or Hoblyn & King so apologies for the apparent arid writing conditions but I do have a confession to make and a sort of (poor) excuse.

As predicted by H&K for some years things everywhere appear to be going from bad to worse. Of course there are quite a few new age "wealth" managers and their clients extremely happy with the performance of most western indices but even Bloomberg has considered that there has been a great disconnect between Wall Street and the real economy referred as Main Street.The nub of the problem is that there is a vast swathe of FINANCIAL REPRESSION occurring daily and many people haven't even noticed.

Have the recent events in Cyprus surprised me? A. No......many observers have predicted this. Asset grabs are the order of the day as the EU turns many of us into ZOMBIES daily. Repression can come in many forms. It can be outrageous taxes (as prescribed by the EU over Cyprus), excessive and pointless REGULATION (the 'R' word in my judgment IS the problem everywhere), too much assistance to Public Employees (over Private Enterprise), bad and creative accounting, bad and creative spinning of newsflow, hypocrisy, lies and corruption supported by newswires....need I go on (?).

In the City there is a constant debate about RDR, charging, FSCS, the 3 new hydra regulators, derivatives, accounting practices and everyone with a position in a regulated entity seems to have flown the white flag over the COST versus BENEFIT ratio. For record at least 10% of brokerage income & fees is sliced towards 'R'. Thousands of ZOMBIES are working for the regulators and compliance departments and '000s more are earning a living from training people in the ZOMBIE universe, enforcing CPD etc...it's all totally pointless but creates '000s more of pointless jobs. My partner keeps reminding me that this is exactly how USSR prospered until its eventual demise.

Hasn't anyone in government (what government?) or the financial media considered that the British economy ignited during the Industrial Revolution WITHOUT 'R'? Historically NO investors were ever protected through support mechanism's, too big to fail policies (but smaller enough to steal from- SEE CYPRUS) and yet today an entire industry is telling everyone that "PROTECTION" works.

(Editor's note; when President Reagan was shot some years ago a popular song was called 'Protection' by Graham Parker & the Rumour...the catch went ....."you can't get, you can't get, you can't get NO protection....protection.")

Well I've got news for you ALL. Protection doesn't work when the economy has been zombified, when there's NO money around, jobs are being exterminated and growth is zero to negative, inflation is reported at 2.8% (9 month high -ONS),  real inflation is closer to 10%, interest rates are geared to protecting (?) the zombified over-geared crowd but NOT savers and zero-debt citizens, when exchanges are dismantled for regulatory rhetoric and everyone is looking at a crooked mirror.

The crazy side show to all of this QE, quasi Keynsian policies, etc is that governments support bankers (more bonuses), governments support regulators (more compliance, paper & bonuses), governments support each other, governments don't create jobs, governments don't save because austerity is a mirage, governments are running scared which is why Cameron has sent a RAF aircraft with Euros1 million for "our/their" 3,000 troops but no confetti for 60,000 ex-pats........

The establishment is supporting itself BUT not the economy.

There is an economic war going on. It is not between LEFT & RIGHT, left of centre v. right of left of centre (5 3 2, 4 4 2, 4 3 3), labour v. tory, liberal v. loony, catholics v. protestants, monarchists v. anarchists, red rose v. white rose, republican roundhead v. cavalier.....it is a war between RIGHT & WRONG...market believers v. market destroyers..the old economy and the new economy, old politics & new politics, environmentalists v. quasi environmentalists, humans v. zombies.......the nearest I can come up with is doers v. non-doers.

Governments have turned me into a ZOMBIE but I'm fighting back....(my excuse)

Twitter: CoeurDeLion

LONG: Longbows and arrows, gold, idealogy
SHORT: markets, bureaucracy, REGULATORS, the NEW regulated press

FREEDOM.....my experience

I remember sitting in various stockbrokers office during the early 1980's listening to 'experienced', elderly and wise stockbrokers discussing the upcoming 'Big Bang' in the City and many of them saying that the exchange, the market, the country would rue the day allowing bankers, tom, dick and Harry to compete alongside existing old style brokers. Almost to a man they said that stockjobbers should NOT merge with brokers and that external regulation would eventually destroy the market and kill free enterprise. Now 26 years on we're almost at the inflection point for this with millions more than just angry with bankers, politicians, anyone in services industries per se and the extraordinary thing is that no-one can see the completely inane and destructive force of REGULATORS and REGULATION. They have brought nothing to the table, cost taxpayers billions of pounds (austerity?), frustrated all aspects of business especially businesses with small capitalisations and the best part is they are never answerable to their critics, their errors, their failures and are masters in blaming everyone but themselves.

The lessons to be learnt from the experienced experiences (one needs to be a patient patient sometimes) has allowed me to conclude that REGULATION as envisaged in 1986 and 2000 (when FSMA 2000 replaced FSA 1986) has been a total disaster. RDR today is counting down to 1st January 2013 and the heads are already rolling, including mine. In this environment you're either a Roundhead (pro-RDR) or a Cavalier (probably Austrian school)....anyway.

The Leveson Inquiry report has been published this week and just like what has happened in the City the same appears to be happening in Fleet Street. What is at stake here is FREEDOM per se NOT just the freedom of the Press. As has been stressed more than once the vast majority of journalists conduct themselves with 'decorum' and never disgrace their publications, their Editors nor importantly their readers who are their lifeblood. There are a few swine in every sty that need culling and the whole debacle of the ongoing debate fails miserably in realising that the existing PCC has failed in its task of compelling journalists to take their ethical guidelines seriously. What is needed is a stronger PCC with much more independence. What is NOT needed is any form of PRESS REGULATION. If the current crop of Hacked Off supporters and others are given too much platform (Hugh Grant et al) then it is NOT just our PRESS FREEDOM that is at stake here. It is FREEDOM itself. Private Eye and others would likely not survive the next inquisition.

For those who believe in regulating the press please contact any established, experienced and wise stockbroker who worked prior to Big Bang for their take on the matter. Even though there is no (manipulated) poll here I doubt any would back the Hacked Off brigade.

Next stop Moscow comrade!

SIXTEEN TRILLION AND COUNTING

Each individual pallet is 42" wide by 40" deep. The height of the US$100 bills is 38.7". Add 4" for a pallet and the total height of one pallet of bills is 42.7". In a theoretical field of pallets  the pallets are spaced 12" apart.

The field is 50 pallets x 100 pallets by 2 pallets high, so...

width = (50 x 42") + (49 x 12") = 2100" + 588" = 2688" = 224 ft

depth = (100 x 40") + (99 x 12") = 4000" + 1188" = 5188" = 432.33ft

height = 2 x 42.7" = 85.4" = just a little over 7ft high

So our field of pallets is roughly 224ft x 432ft x 7ft high.

At 96,768 square feet, it's about 2.2 acres and well over the size of a football field.

 

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The next time you turn on your television and hear democrats, republicans, liberal democrats, tories, whigs et all discuss any form of National Debt spare a thought for the american middle classes who are staring at bankruptcy. Many people have stated publicly that future generations will pay for this debt. In simple terms they cannot. The maths are unworkable. There is no solution. How exactly does one pay off a meaningful amount of this debt? Let's now look at the back of the fag packet and scratch a pencil mark here;-

 

$16,000,000, 000,000 (16 Trillion or sixteen thousand thousand million)  divided by the working population of USA of circa 154,400,000 = $103,626.94 per each working person in USA. According to Wikipedia the Per Capita wealth of each US citizen presumably working is US$48,450 each. There are 30 million smaller businesses with around 91% working in the Private Sector. This contrasts dramatically with that of Europe and UK where the Public Sector is becoming the ever more dominant employer.If hypothetically each working citizen could put their hands on say $50,000 of hard cash (debt) and gave it to the Federal Reserve then presumably 50% of the debt could be cancelled but it begs the question, what does the citizen get in return? That still leaves around $8 trillion which is still unworkable. No fag packet calculation is being even considered for interest and inflation and no social assumption is being made for government total ownership of property which is plainly proposturous. So what is the solution? Well, it's clear that the US cannot grow its way out of this hole. It cannot sell anything as there would be no buyers. It cannot tax its way out of this hole as there would be virtual 100% unemployment (versus 10-20% today depending on who one believes). Somebody or some corporation has to pay and this is the dilemna. There are $100's billions of $'s held on deposit at US businesses in an already arguably bust banking system. In fact the banking system arguably is a slave to the 'new corporatocracy' that has been created (Apple is just the tip of the cash rich iceberg). Assuming that there's no great technological evolution or invention around the corner then it's fair to assume that the TMT sector could be (soviet style) nationalised (that would cancel somewhere under $3 trillion of debt). In fact the corporatocracy is effectively the state anyway so let's throw BP (now mostly owned by US institutions), Chevron and the entire o&g industry into the mix.

Hell, let's all work for the government. Free enterprise has pretty well been extinguished already. I see that the Fleet Street Letter is now predicting total financial collapse with UK leading the charge.

Anarchy in UK then. 

Harvey Goldsmith for Prime Minister

Years ago I went up to Wembley Empire Pool (I think it became the Arena years later) with my good friend, Jim Penfold, a musician today of 35+ years standing to see Paul McCartney & Wings appear in concert. I remember that it was an amazing gig with Joe English's drumkit projecting the first ever lazer show during the bond theme "Live & Let Die". Afterwards Jim suggested we sneak around the back to see if we could get in amongst the band and their groupies. Jim had jammed on occasions with Denny Lane in deepest Sussex (Rye country) so neither of us didn't really think it'd be a problem. Security though had other ideas and prevented us from getting in so Jim suggested another route via the rear stage entrance where the juggernauts loaded the vast amounts of p-a systems (speakers, stacks, amplifiers, etc) on/off the Wembley stage system. We had got through the high metal fencing and were spotted by someone who looked quite threatening and scarpered (70's slang). I recollect the chap was in his 30s and heavy built wearing a leather jacket, long hair. He sprang into his vehicle, a monster Black & Gold Jeep Cherokee with monster wheels and drove past us with some venom.

I hadn't see him for years until I saw him again on the Andrew Marr Show the other sunday morning. In the 70s he was a rock legend. His name is still known amongst those of us 50+ who loved live music. His name is Harvey Goldsmith and he's probably been the no #1 rock promoter for the last 40 years in the british music scene. On Andrew Marr's show he was reading the sunday papers with General Sir Mike Jackson and someone else who was pretty forgettable. I must say I had to take a second look. The idea of Harvey and Mike together sitting on a settee was curious. When Harvey spoke it was measured and both Marr and Jackson listened intently. Asked what he thought about some subject or other Harvey responded unusually. I will misquote exactly what he said but I think it went like this........"....the trouble with this country is that it is run by THE GREAT, THE GOOD & THE USELESS". I've highlighted the "GGU" bit as he said that 100%. It hit a cord with me and I made a mental note.

Now I imagined that Harvey would simply disappear from our screens forever but can you imagine my surprise when he appeared this week on Sky News commenting on the Rolling Stones concert (?). He was sat next to an american and the body language said it all. Even before he opened his mouth, even before the american spoke, one could detect a vein of animosity between them. The american commented on ticket prices and was questioned by the Sky Presenters about the high prices of tickets ranging from £90 (face value?) to around £1,000 (second-hand value). The yank simply shrugged this off by saying that he ran a TICKET STOCK EXCHANGE. Now this phrase stuck with me too because for years ticket touts have been lamblasted (spelling!) for allegedly spiralling the prices of tickets but here was a ticket impresario suggesting he was running an exchange. Bring on the regulator! I jest of course.

Harvey hadn't really said anything until he commented that he felt that fans were getting robbed here. I took notice at this point. Harvey felt it was immoral to allow this exchange to dictate pricing and to overload the high prices to fans (note the old touts would have gone to jail for this). Harvey's main thrust was that he saw a ticket as a cheap gateway for the fan to enter an arena and reckoned that rock stars like the Stones were getting greedy.

This made me think. Overcharging on the way into a contract ultimately scares off investors. Giving some reward once in is legitimate and if there are more add-ons available that seems to be fair and reasonable.

A few months ago I had the same experience myself at a french antiques fair who wanted to charge all adults Euros 10 entrance. There were 4 of us, I was paying and walked away from the door. I may have spent another Euros 300 but wasn't prepared to get fleeced in this way. Whilst crossing on the ferry the other day the lady from P&O advised me that my £70 ticket one way had expired. She insisted upon charging me another £70 for the crossing whereupon I told her that I would boycott the Duty-Free and Langans Brasserie for the trip. I normally spent £100-150 total on these add-on but P&O lost out due to greed. The lady responded that "the owners of P&O needed the money". Well, they lost out and if Harvey Goldsmith is right then the Rolling Stones may well lose some fans if the current internet practice of online ticket agencies (exchanges) inflating ticket prices is anything to go by.

As Mick Jagger sang that night (I presume)......"You can't always get what you want!"

Anyway I think Harvey should enter politics. His thought process is refreshing.

Opportunity Knocks if you're from over the pond

I was recollecting what DaveCam has so often said about 'Opportunity' in the UK. My confession is that I've blogged about the Conservative hyprocrisy about opportunity before. Let's have a recap shall we?

I've thought for some years that "opportunity for all" as spoken by the great sage actually means "I'd like to give the opportunity to the unfortunate by taking your job and giving it to more worthy subjects". But hehhh, before you think I'm being outrageous and outspoken please spare a thought for the interpreters, who to a man and woman would rather not get involved with ALS and avoid any contact with the new breed of interpreting administrators, or the established, connected and experienced stockbrokers & IFA's who are being subjected to unnecessary examination resulting in 20,000 to 35,000 being expended due to this fascist policy called the RDR. There are plenty of other examples of job replacement all being conscripted in the name of "Opportunity".

In early October at the Tory conference DaveCam spoke again of opportunity....hushed silence......but today's announcement by Osborne at the despatch box of the appointment of the next Governor of the Bank of England, the Old Lady as some prefer to call the building at Bank Tube Station, was pure theatre. Were we going to be told that a member of the MPC was going to get the job, Lord Adair Turner perhaps, that wreckless chap from the FSA, maybe a chap called Tucker, maybe unbelievably Lord Myners, or Lord Hoojie Magfloojie, or god forbid even a 'real' banker of the Cap'n Mainwaring school. Are there any left you ask?  There's been some debate since 2008 about the difference between banking and investment banking. After 36 years in the City I like to think that I've got the definition down to a pat.

A banker is someone who works in an establishment called a bank, takes personal liability for his mistakes, and provides loans to business and personal customers at a rate exceeding the Minimum Lending Rate meanwhile accepting deposits against the loans by providing interest at a discount to the MLR (used to be called the Base Deposit Rate). These people called bankers had real integrity and ONLY worked on margin but above all respected their 'customers', never traded against them and never ever speculated.

So what is an investment banker Mr Hoblyn? Well, it used to go like this. When I started in the City they were ALL americans. We had merchant bankers, something quite different but it wan't long before they too became bankers of investment. Now these chaps found businesses, financed them for flotations (IPO's), provided real capital to the economies and were pretty popular people when they allocated good lines of stock at decent premiums till the late 1990's. And then they got greedy. They worked closely with hedge funds, giving them the meat from the pies, started going synthetic derivative based (for another day), took huge risks with their balance sheets, took zero liability for their failures and yet ensured outrageous bonus and pension schemes ultimately getting the people to pay for this through QE (another questionable enterprise).

The masters of the new universe are Goldman Sachs. They are everywhere and yet nowhere. Technocats with GS credentials can be found at the Federal Reserve, also in Italy and Greece, but look more closely they are everywhere and yet nowhere. The hypocrisy of investment banks and their dismantling of businesses is truly astonishing but it's called 'good' business, allowing for global stability. Greece and Italy and other nations in/outside EU have been victims of GS trade strategies (I should say that JPMorgan, Citigroup, MorganStanley do just the same amount of damage or thereabouts).

So I wondered who Osborne was going to name.......I choked at this point. A nice smooth chap with a crooked tie called Carney, a nice chap with Goldman Sachs credentials. Bloody marvellous and just to prove that DaveCam's hypocrisy knows no bounds the chap isn't even a Brit. He's Canadian so that's all right then. Let's all mount up and give him the red carpet.

But I do suspect that there were a few British bankers spluttering on their cigars at this juncture. Good old David Tomlinson from Mary Poppins Mr Carney is NOT.

Thanks for the opportunity Mr DaveCam!

ps One would think that with our education system someone else from Oxbridge (other than Carney) or even Eton or St Paul's might have been offered the job. Anyway my friend Fintag has met Carney and says he's a nice fellow so that's that then. Good luck Carney.....

Red Tape RED OCTOBER

I've been a vocal opponent of ALL forms of regulation for some years now as readers of this blog know too well. Not only that I am against ALL forms of reconditioning of the workforce. By that I mean this current epidemic of forcing people to go back to school to learn futile facts and figures that have questionable bearing on the abilities of free thinking individuals and wont improve their chances in the work environment.

In my own household my partner (who is half Armenian and half Russian) and I have both experienced this absurdity recently. She is a regulated (ahhhhhh!!!) translator and interpreter with the UK Justice System and registered in Russian/English and presumably English/Russian too although she speaks 5 languages in total. The insistence by her trade body (?) that she take more exams to learn/re-learn/regurgitate her Russian/English is puzzling to say the least especially as she keeps being offered to do work by the UK Courts/Police/others in English/Armenian. One would assume quite innocently perhaps that the people running the trade bodies/agencies might actually read their computer screens. In her case she's taken countless exams already and passed them all with distinction.

I'm not so lucky though. I'm one of those (few) people who fit into the "educated but **** at exams slot" that society today doesn't cater for. I think I have one A-level at a well known English Public School. Interestingly my son, now studying for a degree in History at a top 20 University (one that wasn't once a Poly), got countless O levels mostly A*'s, got 3 A levels two of which were A*'s, took an S level or whatever the modern equivalent is (another great Pass), often says to me..."how do you know these things Dad?" as if he's challenging an OxBridge Professor. He went to the same PS for his O's and crossed the road to the Grammar for his his A's. How is it that he's so good at exams along with millions of other brainy kids who all seem to have similar achievements? I'm sorry but I'm part of that small brigade who really do believe that society is less professional, less knowledgable despite these qualifications and access to easy information c/o the internet.

My partner came back from Moscow the other day with a copy of "The Moscow Times", an english newspaper. Are there any Russian papers in London other than The Standard (note my brother use to go out yonks ago with the current editor I recollect, lucky chap)? I doubt it. Anyway I was struck by a headline "Medvedev Wants Less Red Tape". As you can imagine this was music to my ears so I read it.

Here are the core bits and pieces;-

Medvedev said "..that federal regional government agencies shouldn't demand any more paperwork from investors than existing rules call for". At this point I fell off my chair. I like this fellow Medvedev. I'm now going to refer to him as Dmitry from now on as I feel I may be on first name terms with him very soon.

Dmitry goes on to say. " It is necessary to state the principle that they can't require documents that haven't been directly stipulated." This is weird! . I said this to a lawyer, stockbroker and incorporation agency here in the Wild West just the other day. I was told in no uncertain terms to 'shut it' and fill in more forms. Referring to travel requirements this is what Dmitry then said. "There are a number of states inside the EU that block free travel" I had NO idea that this is happening. FREE TRADE was extinguished in EU long ago but now apparently it's FREE TRAVEL that is prohibited. Dmitry commented. "I think it's unfair and short-sighted". Give Dmitry a Knighthood! If Bob Geldof can get one for Live Aid, the EU can receive a Nobel Peace Prize for organizing riots in Athens and Madrid then surely Dmitry can have a  Knighthood for COMMON SENSE. Unfortunately he ruined his chance by then saying. "Progress had been made in visa relations with the United States (of America) but it wasn't obvious as we would like it to be". Yup, even Dmitry knows that the USA is the new Soviet Union. Unfortunately the UK is just a muppet state to Washington and HM was informed some time ago not to put his name forward alongside Mr Angry from Enterprise Britain.

My ex-friend DaveCam was seen pontificating at the recent Tory Conference. He said nothing of any note but did suggest that UK was suffering from "suffocating bureaucracy". Well DaveCam I've got  news for you. The plastic bag was placed over my head some years ago and I suffocated in June this year due to fascist principles supplied by the UK regulator.

Now everyone should get ready for school! Don't forget your pencils children.

Black Monday -25th Anniversary

Where were you on BLACK MONDAY?

I've been asked this a few times over the years and since CNBC is doing a bulletin on it today here is my recollection.

Actually the problems started in the weeks prior to 19th October 1987. Many people had borrowed money on rolled over trading positions since the hectic summer where £millions were made (& lost). Many market strategists including the high profile strategist at Dean Witter Reynolds (now Morgan Stanley), John Mendelsohn had warned of the effects of 'programme trading' many times on US tv, etc. No-one listened.

Friday 16th October, however, provided a different slant on capital markets activity.

My father and I were with a small London brokerage at the time, Dunkley Marshall. There were around 40 brokers and dealers and another 30 support staff. On Friday morning the Great Storm hit the south eastern parts of England. I had left my house at around 7am for the 1 hour journey. The station was deserted like many. I scampered back to my house zig-zagging fallen trees and rang the office. A friend of mine, Richard Coles, a young dynamic broker (now living happily in Oz) surprisingly answered the phone. There were around half a dozen personnel in the office including my father who had walked from the Barbican. Coles told me it was like working in hell. It was impossible to answer the telephones around the dealing room with virtually no-one about so he had taken responsibility by operating the dealing room from the confines of the reception desk where normally young girls had transferred calls into the open plan area. By delegating price and dealing tasks to the floor and eslewhere he was just about handling the 'incoming' as the marines would say.

Monday morning was a whole new saga though. I had arrived at my desk around 7.45am despite difficult trains following the weekend when I had had to chop a few trees. Clients were phoning in at an alarming rate and the Mainwaring phrase "don't panic" resounded around the office. I remember clearly one partner sitting opposite shouting at a client after receiving an earful of abuse and concern..."well, you think you've got ****ing problems, I've just bought a farm and had to contend with 500 fallen oak trees at the weekend, now stop wasting my time". Or words to that effect! Anyway it wasn't the first phone that got slammed that day.

The stock exchange electronic pricing system wasn't 'real time' and throughout the day the only real picture the majority of us got were regular updates from our dealers. With the gyrations on FTSE100 of huge %'s (I think the day swing was around 40% although top to bottom around -23%) it didn't take me long to work out that on a 20 minute screen delay the blue prices were probably red whilst within minutes the red were probably blue. A few trading clients took my advice at the time so I suggested a few buy trades at blue and did the same later in the morning. I can say with 100% conviction it was the only time that I've ever seen profits made at the high point as dealers were often shovelling trades at sometimes £'s lower. Of course, alot of discretion have to be allowed and not  many tried this dangerous strategy. The best advice was to do nothing and mercifully many took that on board. I do remember though that an institutional client's boss panicked at around 11am (my contact was in Bermuda on holiday) and sold millions of Attwoods through me at the wrong price; by the time my contact returned on wednesday Attwoods had rallied like most stocks.

By the time Wall Street had opened most in London had prepared themselves for a rocky afternoon. The lessons of the morning had stood us in good stead though.

Somehow we got through the day.

The next day was "Terrible Tuesday". The firms credit control departments were on prozac and the Finance Partner and Settlements Manager tried to come to terms with the carnage. Stock delivery was a serious problem for every firm across the LSE ( and had been for weeks prior to the crash) but I don't recollect any proper firms getting into too much undue stress.

Most investors had stood their ground and as we all now know October '87 was really just a great correction rather than a descending crash like '29 or what we went through more recently with Lehman's.