17 Apr 2013

Scariest Part of Gold Crash?

Reads a headline but the article forgets to mention what really should scare investors, market professionals and regulators: the fact that the price of a major asset can plunge by such a large amount in a few days demonstrates the inherent fragility of financial markets. During the past 30 years the unprecedented growth of  (mostly over-the-counter) derivatives - subject to 'light-touch' supervision - has created a huge house of cards of interconnections between all financial market participants that could rapidly spiral out of control. The absurd length of time required to unwind all the liabilities from the collapse of Lehman - and the number of company 'boxes' created by that firm - shows that the current regulatory scheme is not up to the job. Proper stress-testing of banks, insurance companies, securities firms, asset managers and pension schemes would have to be much tougher and assume a shift in asset prices by multiples of the underlying assumptions that are used today, something in the order of 20-25 percent.

11 Apr 2013

German Managers want banking pay limited - but not their own

A poll conducted by Handelsblatt comes to the conclusion that German Managers favour limiting pay in the banking industry but not in their own companies. How hypocritical can you be? But apart from this questionable aspect limiting pay in the banking industry would mean that only second-rate people would want to pursue a career in banking. This episode demonstrates that the question of pay - especially for senior management - cannot be tackled in specific industries but must be part of a wider solution based on sound management and moral principles.

Fed sends Minutes a Day (!) early - the real questions

In the Lobby-infested cesspool that is Washington it is no surprise to find that the Fed 'accidentally' sent copies of the latest Minutes to a select list of banks, investment managers and lobbyists. While the easy excuse is that it just is a 'fat finger' error caused by some junior staffer (an unpaid intern?) I just find this explanation less than satisfactory. As anyone who has ever sent an email message to a maillist should know a message is only sent to the recipients that are included in the list. If only this select group of recipients gets the mail it should mean that there was a sort of priority list. Otherwise all those who have signed up to get the Fed minutes delivered upon release should have seen the message at the same time. In addition, there should be a forensic audit into the trading activities of all recipient firms to find out whether they profited from this information or not.

10 Apr 2013

Libor - Regulators asleep on the Watch (again)?

While I have doubts that the alleged or actual manipulations of the Libor rate-setting process really did major harm to anybody it is amazing that one large market participant was allowed to play a crucial role in the fix. Another case of regulators asleep on the watch?

4 Apr 2013

Salz Report on Barclays - another Figleaf for the Establishment

The lengthy - and ridiculously expensive - Salz Report has to be seen in the long English tradition of conducting expensive and lengthy enquiries when the solution to the problem would just have taken common sense and a willingness for decisive action. Both ingredients are missing. It is not clear why there would have to be an enquiry into Barclays Bank and not into any of the other major banks, investment institutions, regulators and politicians who must certainly share a large part of the blame for problems in the financial sector - and wider economy - that have evolved during the past few years. The proverbial blind man could see that executive pay in banks - but also in investment firms and major listed companies - has spiralled out of control. It leaves a sour - not to say salty - taste in one's mouth when one sees that the costs of the report are such that the 'solution' is part of the (pay) problem. How can anyone justify that a 244 page report that any junior management consultant with his head screwed on could has put together can cost £17 million! And how much of that did go to the City 'Grandee'?

3 Apr 2013

No regulators slated for failure

But HBOS chiefs 'slated' for failure (Financial Times). And anyone thought that there was a proper investigation of banking problems?

27 Mar 2013

When the state loots the shareholder

State-sanctioned looting of shareholders becomes the norm in the United Kingdom. First not-so-gentle persuasion was used to force banks to compensate 'victims of mis-selling' (though how these millions were forced to buy products that they were not supposed to either want or need still is beyond me). Then all those who were at the loosing end of derivative contracts that were designed to protect them against interest rate risk were out with their begging bowls and a complicit media commentariat, lobbyists and politicians jumped on the bandwagon to punish the unloved banking sector. The latest illustration of madcap regulatory overreach is given today as the UK's FSA fines Prudential Plc 30 (in words: thirty!!!) million pounds on the spurious pretext of not having been informed in time about a possible bid for AIA. The shareholders and pensioners who are paying for this nonsense will be the ones picking up the bill that feeds the ever-rising army of paper-pushers in the regulatory Gulag that slowly strangles the financial industry in the UK - no need for the 'Troika' to aid an inept government of PR luvies.

18 Mar 2013

Stalinist Incomes policy - spiteful and arbitrary

The European (Dis?) Union is on the slippery road to serfdom (Hayek) when professional agitators like Sven Giegold (read his CV carefully, you will shudder when you read it!) are given the opportunity to introduce 'laws' that arbitrarily set pay (Financial Times) for a minority of the population that he and his minions want to punish for ideological reasons. It is not possible to argue with these extremists (have a look at what 'Attac' stands for) and the only way to combat the takeover of the pseud-democratic institutions in the EU and the member states is a complete overhaul of the political system based on a radical and comprehensive form of direct democracy safeguarded by a proper bill of rights that bans discriminatory legislation. Those who do not just want to shrug their shoulders or clench their fists in their trouser pockets should contact me and take part in the democratic reform project.