We are an Earnings Machine

Claims Steve Schwarzman (CNBC) - but is it very diplomatic to boast so openly about the profits Blackstone makes off its investors? Maybe a little bit of PR coaching might be appropriate - one still remembers a birthday he celebrated that was supposed to cost $ 1 million.

London the global Bitcoin Hub?

Pull another one would be my first and only reaction. I may be of the wrong generation but would still stake my reputation on the fact that this will end badly. In an age where Central Bankers are close to act like petty criminals and steal money from Savers all over the World it is unlikely that a Bitcoin will ever provide a reliable store of value. A gambling chip maybe, and we all know that people want the excitement of rolling the dice, even if statistically they are playing a losers game.
London stakes its claim as global bitcoin hub (Reuters)

The 'fun' (ugly?) face of the City

The one thing that surprises me - given the amount of ever-more sophisticated technology that is available - is the survival of the voice-based interdealer brokers. As this incident demonstrates the level of sophistication needed to fulfill the role of go-between is not all that great. So may the level of 'client entertainment' have a significant role to play? Sooner or later the penny will drop and another source of generous income for many staffers will be rationalised away, or fall foul of tightening regulation.
City traders make new recruit eat 8 quarter pounders (Mail on Sunday)

Jamie Dimon clings to outdated business model

No surprise that Dimon defends the status quo, bigger is better and the banking department store model is best (Reuters). But I wonder if he reads the trends in financial services the right way. Specialist providers may well be the way of the future, especially if they make good use of technology. Payments, Fund Management, Investment Banking Advice, Securities Trading all can easily - and cheaply - provided by standalone providers. One only has to wonder why there are still so many bank branches on the High Streets. The only - and probably the real - reason that gives JP Morgan and other super large banks an edge is the (sad) fact that customers - and unfortunately politicians and the regulatory minions - consider them too-big-too-fail. That still pushes clients their way that would otherwise consider cheaper and more nimble competitors. The growth of new product providers is therefore stunted which gives the large banks the opportunity to cling to their outdated business model.

Single Capacity to protect counterparties - notes on Goldman/LIA dispute

Not a question of being smarter, though that may well be the case. It is a question of morality - or lack thereof. When firms are feted as being the 'most powerful' investment bank this may go into the head of staff and senior management. That success is only measured by the size of the pay packet shows that morality is unlikely to be top of the priorities in the organisation. The setup of financial markets invites problematic relationships between firms and their customers (client would be an inappropriate term though it is used ad nauseam by staffers). A lawyer is smarter than the average user of legal services, but only in this narrow field of expertise. No one would need a lawyer unless he has an informational advantage, i.e. knows the law better than the client (here the term can be applied with justification). Goldman and other financial service providers WILL know more than the client, that is their job. But the (moral) imperative is not to abuse this advantage. This particular case will make its way through the courts but it appears from the outside that the Libyans were in all likelihood even more in need of being protected as a client and not just considered a counterparty in an equal exchange. A system of single-capacity, splitting market making and 'advice' would go some way in preventing similar scenarios. It would not automatically eliminate conflicts of interest, maybe a code of practice for the protection of customers would also be appropriate. Self-styled 'Business principles' devised by the firms themselves are not sufficient.
Goldman Sachs profit on disputed LIA trades back in focus (Financial Times)

QE - should you laugh or cry?

More and more desperate calls for all-out QE in the Eurozone make me laugh and cry at the same time. Laugh because it is not very likely that the hoped-for revival of the economies in the weak member states of the zone will happen. One has to look at the micro-economic aspect of the problem: why would any business invest/hire just because the rate of borrowing has declined by some small fraction? Given high tax rates - and they are going up all the time, openly or in stealth fashion (think 'fees' and 'charges' by public bodies) it should be expected that the entrepreneurial class will cut back on its work load. Why not take it easy if the larger part (60, 70pct if one adds in tax on taxed income, i.e. VAT, stamp duties etc etc) of additional income is confiscated by a parasitic caste of politicians, bureaucrats and their favoured beneficiaries? And why would I cry? Because the chances that the march into ever-higher control of our lives via the permanent avalanche of ill-thought-out legislation and higher taxation/spending is not going to be reversed anytime soon.

Does Bini Smaghi pass the competency test?

Lorenzo Bini Smaghi may have many (too many?) fine qualifications, but he is basically an academic and bureaucrat who never in his life made a loan or traded a security. So it is not clear whether he would pass the newly-introduced tests that are now de rigueur under the UK 'senior persons regime'. It may well be that he would not want to undergo this water-boarding by anonymous and unaccountable regulators - understandably so as it is nothing but a new version of a black-balling that belongs to a long-gone area. But if he is seen as competent enough to supervise one of the largest banks in Europe one wonders what all the ink and paper worth on banking regulation has really been wasted for.
Regulators must check all senior bankers (Daily Telegraph)

Being a 'Global' Bank brings extra Risks

One has to wonder if being a 'Global' Bank is really an intelligent business proposition. It requires Superman/woman to manage far-flung empires and activities that can span more disciplines than any normal human can realistically be expected to fully understand. And a particular risk factor are differences in business culture that senior management - be it located in New York, London, Frankfurt, Zurich or Tokyo - can hardly be expected to appreciate to the extent that would be required. Deutsche Bank lending money to build another hotel/casino in Las Vegas? Citigroup lending money secured by warehouse receipts in Chinese Ports? An Austrian Bank lending money to a steel business in Russia? Do these activities make sense or would concentration on a geographical area one understands and is familiar with be more profitable in the long run?

Succession planning at Santander - an example to follow

Yesterday's announcement of the death of Emilio Botin, the man behind the immense growth of Banco Santander over the past decades, highlights the need to prepare for the smooth handover of leadership. While Santander may appear to be a special case - the succession is clarified on the next day - every business should be able to replace key personnel without delay. This applies not only to CEO roles but all managerial positions in the organisation. Internal promotions should be the rule as they boost morale and team spirit and usually are cheaper and quicker to realise.

Regulators know no shame when they are after taxpayer's money

European Commission to investigate possibility of levy to fund EIOPA (IPE)The EU is particulary shameless as there is no proper supervision by any real government and the pretend-parliament is just a resting place for party hacks.