Saturday, December 31, 2011

2012 will make 2011 look like a picnic

2012 © God

News comments:
So this is what we thought 2011 would look like:

You Thought 2010 was a shocker

Dow is up 3.4%
US House Prices down 16%
US Interest Rates go up to 1.5%
Gold increases 35%
English Premier League will go bust.
Italy leaves Euro
UK police are fired and replaced by the Army (borrowed from France)

As you can see we were hit and miss. 2011 was a shocking year for many and liberating for others. With dictators falling like flies and eurocrats acting like flies, there was something of everything for everyone.

Dow was up 5.5% not 3.4% (marketwatch)

Gold was up 10.23% and not 35%

US house prices were only down 4% ish and not a ludicrous 16% (sandp)

US rates stayed flat mostly

The English Premier League didn't go bust thanks to lax money laundering checks (Blackburn Rovers for starters)

UK police were nearly fired during the summer civil looting (or as the BBC calls them the "riots)"

What we never saw was Paul Ruddock being knighted. Arise Sir Hedgie. (daily mail) In 2012 his wife will win the Booker prize (amazon)

Here are some predictions for 2012:

The world will not end
Dow is up 7.8%
Obama is re-elected
Sarkozy becomes a chat show host
UK wins 1 medal at the Olympics in London
Russell Brand marries (oops, wrong blog)
Long plays will be French wine, tobacco, Samsung, Big Macs and Toyota
Short plays will be anything European
UK to declare war on France when the Euro collapses in Q2
Q1 Greece will leave the Euro (please)
S&P downgrades the USA to junk in error
Gold increases 20%
Bank of America goes bust (again)

Gossip:
Goldman Sachs will buy out Bank of America and then split off into a new firm called Goldman Sachs Wealth Management



Friday, December 30, 2011

Internship for Dummies: Cheat like a banker

IB © realmagick.com

News comments:
For a number of Investment Banks, internship applications have to be in very soon.

Being the sort of person who wants to help the younger generation start a career in a diminishing profession, I have recently imparted some advice on how to fill in the on-line application forms for a number of the top institutions (as in brand recognition not ethical behavior) to some undergraduates.

Some of the websites were shockingly awful and the questions were just prime for cut and paste answers. Uploading covering letters and resumes is so pre 2000 although some allow a link to linkedin. But this is dull.

What amazed me is how the undergraduates cheat to get interviews for the internships. They complete fake applications and then huddle around laptops taking screen shots or videoing the online test questions. And this is done many times (don't the banks check the IP addresses?) and the questions and answers emailed around. The students are also experts in C++, the Bloomberg API and can speak fluently many languages. They have also been the captain of every school team going, have beaten the HFR index for the last 5 years with their share portfolios and know more about the financial state of Banks than the CEOs or PR departments.

Banks like to bend the rules and it seems encourages those who apply to do the same.

Today's shorts:
Germany bends its own rules (bloomberg)

Today's longs:
2011. A great year (efincareers)

Gossip:
Euro will collapse tomorrow ...



Wednesday, December 28, 2011

2012. Things to do before you die

Porn shop © standard & poor

News comments:
Pawnbroking is not regulated by the FSA in the UK.

It is regulated by the tax authorities (HMRC) instead. Given Pawnbroking is the new banking system, surely this is a mistake? The industry probably loves this low level of supervision which explains why it is booming. Many people are asset rich and cash poor and whereas pre 2008 the banks and finance houses were dishing out debt like hay to a horse (Ed: uh?), cash is in short supply because most of it is sitting with the ECB and BoE. 2012 will be an exciting year of failure so opportunities will abound. 

Investing predictions include non Euro cash, the GEO (German Euro), Australia, Norwegian real estate, copper, silver and shorting the S&P as well as Obama.


Today's shorts: 
None as its the festive season.


Today's longs:
Job fest at pawn shop (telegraph)

Premiership footballers to bail out the banks (telegraph)


Gossip:
Thanks to procastinating Eurotechnocrats the Euro may collapse later in Q1 2011. We apologise to those who hang onto our predictions. Hedge Funds had a shocking 2011 and it is clear most of us are losing our touch. Apart from BH and MW and HH.



Wednesday, December 21, 2011

All I want for Christmas is a triple A

AAA © standard & poor

News comments:
Credit Rating Agencies are a bit old fashioned.

Now we have CDOs and Twitter, the CRA's have become a bit like Microsoft. Powerful, monopolistic and going the way of the dinosaur.

Still, at least us Brits can feel smug being at the top of the CRA tree (heaven knows why) whilst Germany and France ready themselves to join the USA and the Isle of Man in the "has beens".

Fitch (which is French btw) wants to move the USA into the "has beens". Wow, who cares? I would prefer America debt over any Euro country debt, any day of the week. Of course I would prefer Norway or Australian debt but their currencies are bit too wobbly.

Christmas is upon us. The banks are rejoicing that their bonus pools are full of cash thanks to the ECB's reckless lend splurge.

When will these technocrats ever learn?

Today's shorts:

Fitch Fists the First Amendment (telegraph)

Hungry Shafted by S&P (bloomberg)

Today's longs:

ECB sweet shop sells out (reuters)

Gossip: Obama to surprise us all and make a second term. [Sorry about the Typos: One drink too many at the Christmas bash]



Monday, December 19, 2011

Euro: When chemo is no longer required

broken © fintag

News comments:
Christmas drinks.

A marketer from Bluecrest. An American lawyer at a Swiss bank. A hedge fund lawyer. Economist at Bank of England. A financial journo. High Net Worth who trades own money.

The Euro featured heavily. The optimists believe the IMF will save the day. National governments will band together and pour money into the IMF which in turn will enable the ECB to be a lender of last resort. The pessimists believe the IMF will not be funded, the Greek unpaid army will take power and Italy will be found to have cooked its books, the Spanish banks will have a run that forces them to be nationalised and the UK will, with the help of the USA, ensure the Euro dies a painful death by obstructing any treaty or fudge.

Yep. Euro will end at the end of this month,

Today's shorts:
IMF says non (telegraph)

Today's longs:
Korea to be one (bloomberg)

Gossip:
Spanish health service to collapse by next summer.



Thursday, December 15, 2011

Eurocrats should go to specsavers

broken © fintag

News comments:
Bluecrest have confirmed our analysis.

Platt of Bluecrest fame has said he is short of ALL European banks because they do not mark to market like most hedge funds, and are ALL insolvent. So if you know anybody receiving a bonus from a bank this Christmas, let them know that their employer is insolvent and it is likely the bonus will be clawed back. Mind you if its options and stock it is probably worthless anyway. (bloomberg)

Real Estate and toxic illiquid stuff mostly. As we reported last month we don't understand why the top 10 rated banks are all European (fintag).

Funniest of all is France demanding the UK is downgraded before it is downgraded. This is wrong. The UK has intellectual property (we invent pretty much everything) and real estate in London is worth more than the whole of France. (businessweek). The UK has its own currency and can set its own tax and spend policies unlike France which has to ask permission from some eurocrats in Belgium. Without the common agricultural policy France would be Greece with better wine.

I hear the UK government is going to concrete up the Channel Tunnel and tax French Banks in London.

But enough of this vitriol.

I have a lot of money riding on the collapse of the Euro. However, I need to be more specific by what I mean in collapse so I will report back. You know me - I hate being wrong.

Today's shorts:
Google wallet.

Today's longs:
Paypal.

Gossip:
Hedge funds preparing to bail out Greece.



Wednesday, December 14, 2011

Europe: 25% have never used the internet

Backward © fintag

News comments:
Europe. Sophisticated, forward looking and tech savvy.

Unfortunately the "ia" countries (Bulgaria, Croatia, Romania etc) are pulling Europe down just like Greece, Ireland and Italy have pulled the Euro apart.

The latest report shows only 75% of the European population has used the internet.

Is this a good thing or a bad thing?

What it shows is Europe is two speed. Why the Dutch, Germans and French want low grade countries to join is bizarre (cheap labour? So they can feel superior? Money Laundering possibilities?)

(Eurostat)

Today's shorts:
UK haven of quality (ftadviser)

Today's longs:
"Euro A" moves a step closer (bloomberg)

Gossip:
THAT Euro bank that is about to fail which we all know about but cannot discuss is NOT Swedish.



Tuesday, December 13, 2011

Royal Bank of Shite

RBS © fintag

News comments:
RBS. I mean where do you start?

Pre 2000, RBS was a dull retail bank. I had an account there because it was one of the first to have internet banking. It was Scottish so had to be a safe bet given my perception of the Scottish love for protecting cash.

And then Gordon Brown decided he wanted RBS to be the biggest bank in the world and so helped his chum, Fred Goodwin, in that quest. Retail bankers became structured product experts, dabbled in exotic derivatives and played around with its balance sheet like a child with OCD in a candy store. It lent to overvalued real estate, private equity, anything with "high risk" written all over it. Its systems (excel mostly) were never enhanced and the dour buildings and depressed staff just took their bonuses and kept their heads down.

The FSA who regulated it didn't really regulate it and when it sanctioned the buy out of ABN Amro for silly money at the top of the market it spelled the end and it did. You know all this anyway.

The recently published report is a farce. But it is history and nobody learns from the past. If they did we wouldn't have had Madoff for starters.

And yesterday I learned more staff were being let go. Projects half complete and control processes run by less staff.

At least the Irish banks blew up in spectacular style. RBS just ended up lining the pockets of a few MDs.

Today's longs:

Ivy Leaque shun IBs and Consultancy firms (bloomberg)

FSA in a coma (independent)

Gossip:
RBS to rebrand into "Perfumes R Us"



Monday, December 12, 2011

A very dangerous man called Andrea

Andrea © reuters

News comments:
Andrea Enria.

Ever heard of him (yes its a bloke)? Thought not.

Well he is probably the most powerful person on the planet second only to Ben Bernanke. He is loved by #occupy lovin' anti-capitalists and feared by governments and bankers alike. Credit Rating Agencies hang onto his every word. He is one of the reasons the UK played its Euro treaty veto trump card. He was recently compared to the Ayatollah Khomeini by the Italians which is telling because he used to be the head of the Supervisory Regulations and Policies Department at the Bank of Italy.

So who is he? Well he is Cambridge educated, has Mervyn King's cell number, and heads up the European Banking Association. The EBA is not even a year old but every pronouncement it makes causes the markets to spasm and Bankers to fear for their bonuses. Last week he said European banks needed an additional EUR115bn capital. That means rights issues, no bonuses, bail outs, no lending. He wants to turn them into pension funds. Now if the banks need to also pump cash into the Euro-Tarp, that number will be much larger.

Odd that now the UK is no longer European the EBA is looking for office space in ....London.

Today's shorts:
Andrea (financialnews)

Italians take Andrea to court (sharecast)

Germans give Andrea a hard time (speigel)

Today's longs:
Poundland (pronounced Poland) (poundland)

Gossip:
EBA to make hostile bid for the BBA, FSA and BoE.



Who needs Europe? Wonga and Poundland to save the UK

Boot © fintag

News comments:
Last week we were hoping to see the EU come up with a solution to shore up the debts of Europe.

We were looking for hyperinflation policies, a printing press party and haircuts all round. That would have been the right solution for the markets.

Instead we got the plot for a new movie:

SCENE 1

Cabin boy Sarkozy grins as he polishes Captain Merkel's thigh length black boots, her vice like hands gripped onto the steering wheel of the Titanic 2.0. She stares into the rear view mirror that engulfs the windscreen, laughing at the mutinous Cameron flapping around in the ice cold sea clinging onto a hole infested life boat tossed his way by the Red Tape crew. Sarkozy comes in his pants and squeals "Bunga Bunga" at the Italian pirate Berlusconi, hog tied from the ceiling.

Captain Merkel scratches her beard and speeds off towards a large iceberg called Default. Meanwhile, Cameron is picked up by the US America, with Captain Obama and a thousand cameras streaming the event across TVs worldwide as a new state of America is declared ....

Much has been written about the UK's "enough is enough" Euro spat. The people love it, the politicians hate it. It maybe the beginning of the end of Winston Churchill's dream of Europe Integration but those who are rioting in Greece at the IMF Junta, the starving young adults in Spain or the poundland-wonga lovin' Brits trying to have one last Christmas like the old days, this is all a side show.

The markets which in Europe's case are driven by London will continue to rip apart the European dream.

This is the only story worth reading today ...

Larry Eliot (guardian)

SIDE LETTER:
And for those who think an Intergovermental treaty is the way forward, it is apparently illegal under EU law. The Euro Council President Van Rompuy knows this which is why he wanted a side letter to the existing Lisbon Treaty.

As reported in (Speigel)

"Cypriot President Dimitris Christofias described the dilemma in a nutshell: 'We really ought to engineer a revolution against Merkel and Sarkozy, but each of us needs the two of them for something'""



Friday, December 9, 2011

Euro has been saved!

Loser © fintag

News comments:
Good news: the technocrats have found a solution to saving the Euro.

Despite there being in existence a Stability and Growth Pact since 1997, most of the Euro countries just ignored it. Germany and France gave it the middle finger and Greece et al followed their lead.

Sarkozy (election next year) has convinced Merkel (paralysed and paranoid) to beef up this Pact and allow the EU Supreme Court of unelected judges to penalise countries who disobey. Penalties will include taking away rights to tax and spend.

Nothing new then.

The UK laugh as more French banks are downgraded (reuters) and David Cameron says "good luck" whilst the markets are totally aghast at more red tape and promises of sorting out future fiscal problems.

The IMF is to be given money by the ECB. So where does this money come from? Oh, lowly capitalized European Banks and countries like Mexico who want a bigger say at the IMF.

Upshot? Europe to collapse by the end of December as predicted earlier this year.

Today's shorts:
France and Britain go to war (again) (telegraph)

Today's longs:
Emerging market countries to help out old and decrepid countries (bloomberg)

Gossip:
Las Vegas to premier fight of the century: Sarkozy v Cameron.



Thursday, December 8, 2011

Interlude

INTERLUDE

While we wait for the EU Summit Bazooka, here is a UK MEP stating why bailouts don't work (not that anyone in the EU is listening)




Wednesday, December 7, 2011

Breaking up is easy

15 minutes to madness © fintag

News comments:
Following my recent concerns on which currency my newco should be based in, I read on cityam.com/forum that a couple of academics say it is a no brainer.

A simple novation agreement attached to all existing contracts is required.

1971. Decimal Day. The UK converted from the old complicated Charles Dickens sterling into a proper French metric based system currency which we have today. New Zealand, Australia, Argentina, Germany and many more have switched from one currency to another over the years including of course all the Eurozone countries.

Apparently you print new notes and coins, tell the world you have a new currency and issue it at parity with the old, put in a timetable that allows the new currency to float within a certain period and away you go. You could do it the next day.

The Eurozone could do the same thing. Euro A and Euro B (fintag).

So all this talk about disaster is wrong. The real reason the Euro continues is because the poor (all countries except Germany) take from the rich (Germany) and the rich exploit the poor.

Of course the Euro could survive if it became united. The USA is a currency union with states that are countries like California and Texas. The UK is a currency union with states like London and Scotland and it survives.

But the Euro will not.

Today's shorts:
Privacy is over for rich people (telegraph)

Today's longs:
World to be saved later this week (bloomberg)

Australia booms and booms (marketwatch)

Gossip:
The word "rich" to be redefined as people who are not poor.



Monday, December 5, 2011

Setting up a newco: Which currency?

Winner takes it all © fintag

News comments:
The Euro collapses this week.

So I have a dilemma. As you know the UK is not a place to do fund business. There are 3 places left in Europe to set up a fund - Malta, Ireland and Lux. Each has its pros and cons but Malta is the preferred choice. That was the easy bit.

The complex decision is what accounting currency should this entity be based in?

The Euro is the currency of Malta. Tweaking the Memo & Arts will be tricky but it will be worded such that if the Euro is no longer a valid currency it will rebase to GBP at some formula fx rate. However, this is trivial against existing forward / future contracts in Euros. In fact any contract with Euros mentioned.

What if you have bought some French debt with redemption in 2047 for example? If you don't get your Euros back, surely its a default?

When the Euro collapses the winners will be the lawyers.

Today's shorts:
No jobs (cityam)

City of London now run by the Germans (cityam)

Today's longs:
Talks to solve Euro crisis (bloomberg)

Gossip:
eBay to ban the sale of old Euros.



Thursday, December 1, 2011

Bonuses will save us all

Squirrel © fintag

News comments:
Mervyn King is banging on about Banks preserving capital and using their bonus pools to store up cash for a rainy day (like when the Euro finally collapses - the only thing on my list for Father Christmas).

What a dumb idea.

As much as bonus bashing is de rigueur, bonuses are good for two reasons:

The first is 50% of bonuses are paid out in income tax plus the extra Employers National Insurance at 12% plus. The UK government needs all the tax it can get.

Secondly, bonuses paid to bankers are usually spent on something. The economy needs people to buy things.

Storing up bonuses on a bank's balance sheet is pointless. If these bonuses not paid out are treated as profit, corporation tax applied is less than income tax so the UK government receives less tax. Banks would however, most likely, net this bonus pool against bad debts so there would be no tax revenue and no expenditure - just a shuffling of the balance sheet as the Bank of England would like.

Growth is about demand. People buying things. Mervyn King is more obsessed about banks not being around. This is crazy. Banks should be allowed to fail. Stopping them from failing is worse than letting them fail. Bonuses are a good thing so let banks pay out huge bonuses because most of this money has been given to them by Mervyn King anyway (QE has just topped up bonus pools).

Banks should distribute as much as they can in bonuses. Big bonuses will save us all.

Today's shorts:
King is way out of line (telegraph)

USA = Unemployed States of Anarchy (marketwatch)

Today's longs:
Euro is saved!!! (ft)

Gossip:
New Euro to be called the European Dollar.