Monday, April 30, 2012

A Radical Fix

Fixer © fintag

News comments:
Political correctness and the status quo are getting in the way of sorting out the dire economics of Europe.

Ever the one for ranting, today it is time for fixes:

1. Ban all goods and services from China

2. Force all unemployed people > 1 year into National Service / Community Service

3. Reduce tier 1 capital for banks to 5% and force banks to recapitalise through rights issues

4. Banks must not have more than 10% of their market (however defined)

5. Greece, Spain, Portugal and Italy to follow Iceland by abandoning Land Rovers

6. Discourage people from living beyond 55

Today's shorts:
Madoff advisers make most (bloomberg)

Today's longs:
Iceland (Greece take note) (reuters)

Spain to give workers minority rights.

Thursday, April 26, 2012

The end of structured products

Dinosaur © ILFR

News comments:
From futures to subprime sandwiches, structured products are coming to an end.

Most of the world follows the lead the UK's Financial Services Authority takes. It is true. Given London (although when Scotland goes independent watch its rise to become the number 1 financial center in the world) is the world's number 1 financial center, it is no wonder all those wannabees have copied the FSA handbook verbatim. The FSA jumps and other countries follow.

One thing the FSA has always hated is the selling of structured products. The new FCA replacement of the FSA will, we are led to believe, rubber stamp all new products. That means every new bank account, mortgage and fund launched will have to be given FCA approval. The stopping of Life Policy trading is the first step (telegraph) and more will follow.

The FCA believes all retail customers are vulnerable and should never buy anything more than an old fashioned current account and ISA.

Singapore, HK, Frankfurt, Edinburgh and New York are rubbing their hands.

Bye bye London (he says sitting by a swimming pool somewhere hot).

Today's shorts:
EU shows countries how to grow (reuters)

Today's longs:
HSBC readies to leave UK (reuters)

The Museum of Structured Products to be opened in Detroit.

Shadow Banking is back with a vengeance

Shadow © wonga

News comments:
Banking is dead. Long live the Shadow.

The UK used to have hundreds of banks offering choice, competition and relationships. Move forward to today and it has 5 dinosaur like cost machines that do not provide a useful function to society except leach tax payers money to pay for the out dated concept of bonuses. Bonuses historically were paid because salaries were low but now they are paid on top of big salaries with no risk or [Ed: Enough]

While the tail between the legs FSA seeks to bolster its coffers by fining "names" and pumping out consultation papers and opinions without guidance like Goldman Sachs used to pump out subprime parcels, the real world is struggling and is having to play with fire.

Banks no longer lend or sell anything useful so in its place we have Shadow banking. Lightly or not at all regulated with high fees and APRs because when you need something you will pay anything for it.

Overdraft facilities.

Banks used to like short term lending - now they prefer to lend to the ECB than help real people live their lives and allow SMEs to prosper and pay tax.

Take Thousands of bips and happy customers who live day by day. Shocking.

Take Fundingcircle / Zopa
There is an angling shop wanting to expand. Banks are not interested and so Mr Fisher has to resort to peer to peer lending. Isn't this some sort of collective investment scheme? Or unauthorised money lending? The FSA are nowhere to be seen despite fees of 3% and a bunch of credit crunch causing private equity spreadsheet jockeys tapping into a new market and encourage retail punters to spread the risk.

Independent Financial Advice.

IFAs are no more thanks to RDR. Gone are commissions to be replaced by hefty admin / management fees and no free advice. Punters now have to rely on unregulated websites to work out what to do with their money.

Take / Nice but its run by journalists. Shocking.

Stock broking.

A nightmare. Taxes here, trade reporting there, suspicious transactions there, exchange arbitrage here, monopolies there.

So what do we have instead? Spreadbetting. Basically its trading but its not. Unregulated and a few have gone very wrong.

Yep, bets are not trades. Bets means no tax and no regulation. Spread bets on stock exchanges, commodities, bonds, fx, property are not the same as playing with options and futures apparently which are becoming highly regulated.

And what about the opaque trillion dollar Repo market? The rise of Credit Unions? The collateral lending of Pawn Brokers?

Capitalism likes to plug the gaps and it does. The unexpected consequences of printing money, creating false banking models and banks funding governments who tell them tier 1 capital should be increased and that means banks buying more debt is leading to a distorted unregulated fee fest.

One step beyond....

Today's shorts:
Repo man (reuters)

Today's longs:
China shadow (forbes)

Shadow Banking lender of last resort to be Apple.

Friday, April 20, 2012

Barclays is worse than Google

selling one's soul © fintag

News comments:
Getting a credit card is pretty difficult these days hence the spiralling out of control shark lending that is going on.

Not that having a credit card is something to be smug about. Today I have learned using my BarclayCard means spraying the world every detail of my transactions to anyone prepared to buy it. Unless I opt out of course.

When you sign a contract, you sign up to the terms and conditions of that contract. If they change, there is usually a deed of amendment and both parties can agree or not to agree to the changes. Credit cards and most websites don't do that. Take Google - its business model is to spy and sell. They implicitly state if you are using their services, you adhere to its Terms and Conditions. You cannot opt out. Banks like this approach too and have been building up T&C's to enable them to sell your soul but in a more direct and pernicious way. But at least Google are being watched by the EU and are having to face up to the fact people are real - the banks appear to be getting away with it. So from tomorrow, Barclays will be able to

Obtain information about me from anyone using any means (hacking, ISP reengineering, GPS etc)

Learn how I use my account and pass this information onto people I don't know who can track my lifestyle habits

If I give Barclays information about someone else, Barclays assume I have got consent from that person

Check out my financial associates - whatever that means

Barclays will "keep information about you and how you manage your account(s) private and confidential, but may share it as follows ..."

The long list my information is spammed too includes CRAs, the shops I buy things from using my BarclayCard, any logo on the card (?), and the catch all "if we have a duty to do so..."

In the depths of the T&C is a phone number I can call to stop them spamming my personal info but as I learned when I called them this just meant I wouldn't get junk mail.

So what are the FSA or the Human Rights lobby doing about this?

I know what I am doing and that is paying in cash going forward.

Today's shorts:
Bobby Geezer joins Pandit in the no pay for being useless club (bbc)

Goldmans avoid the pay row (newstatesman)

Today's longs:
IMF bolsters cash pot (reuters)

IMF to bail out the ECB.

Thursday, April 19, 2012

Citi's Pandit is a greedy man

Greed © fintag

News comments:
Stockholders are usually a sleepy lot but they are starting to wake up.

Take Vickram Pandit. Your classic investment banker. He left one bank, created a hedge fund and then sold it to another bank and then became its CEO. He sold Old Lane for a staggering $800 million and then got the top job at a top [Ed: Steady] bank. The man did very well indeed in anyone's book. He lives in a nice pad in NYC and has a large pile near his favourite golf course in Greenwich. But these are small pimples on his wealth and when he demanded $15m to match that of Geezer Diamond, he was told by these once sleepy investors that it was too much. The man should be on minimum wage for he runs a government sponsored charity.

Citi, like most big banks don't know what their purpose is anymore. They are so used to taking they have forgotten that their clients are no longer foolish idiots who will buy any old dream. Pandit is a very wealthy man and should have retired a couple of years ago.

It is sad to see his Greenwich home on the market; he should have sold it in 2007 when it was worth 4 times as much. Of course we are all envious of his sellout timing and we applaud his timing. What we don't applaud is his pension for life job at a bank that should have gone bust in 2008.

Enough moaning. Now back to shorting Spain, Apples and Tesco ...

Today's shorts:
Pandit (msnbc)

Today's longs:
Big House (clusterstock)

Pandit to head up the World Bank.

Wednesday, April 18, 2012

The Shale Gas Bubble

New Order © EIA

News comments:
Shale Gas is the new dot com, the new tulip mania, the new subprime gold rush.

Having recently had the chance to pick the brain of a leading Texan lawyer on Hydraulic Fracturing and shale gas production, it became clear I was out of my league. But I am a fast learner. The media has been bubbling with this exciting new (well its been around since the 1980s) concept that will rid us all of being dependent on peasant states who have oil.

Although it is still unclear which countries will strike gold, it is clear that some of the most indebted countries could find a way out and other non-countries could soon have their own version of Dallas or Dynasty.

Poland. Norway. France. The UK. Yep, this tiny island could become one of the world's leading producers.

Let us hope Greece and Spain find some tulips in their backyard.

Today's shorts:
Spain's debt to be paid by an Argentinian (telegraph)

Spain - I told you so (fintag)

Today's longs:
Shale stats (geology)

UK to vibrate itself (reuters)

UK to shoot itself in the foot (bbc)

Argentina no longer needs Falklands oil (forbes)

No gossip today because gossip = inside information = market abuse = no more lunches.

Tuesday, April 10, 2012

Tax avoiders should be celebrated not castrated

Hard Working Girl © fintag

News comments:
So there I was enjoying the new glossy white and stripped oak offerings in Conran on a Bank Holiday Monday when an elderly hunched man was led through the front door by his nurse.

But I was wrong. The nurse happened to own the most expensive residential property in the USA and he has enough wealth to bail out Italy. And then I got thinking about how was it possible this man had accumulated so much wealth from owning the IP of a car racing programme. He spends a lot of time in high tax London and yet, as George Osbourne learned at the weekend he pays virtually no tax at all.

Screams from the USA where Private Equity carried interest is now understood for what it is, a tax avoiders dream, are now penetrating the socialist debt loving ears of the UK government. And yes, I do believe the UK Chancellor is really a SWP spy.

Apparently if you pay less than 30% tax a year you are scum (take note Ken Livingstone).

I am scum. Last year, like many in my industry I paid no tax. It was quite simple. I didn't pay myself anything. And yet I am being told I am not paying my fair share to bail out politicians who I never elected for to pay their credit card off.

The hypocrisy about tax is startling. This government encourages its people NOT to pay tax or to pay tax at a lower rate than those poor people stuck on PAYE who have to pay tax and national insurance. Wage slaves indeed.

Here are some ways to avoid tax:

Buy Government Debt. Gilts. No tax payable on interest earned.

Buy Residential Property. Profits on sale. No tax.

Save. ISAs. No tax on gains.

Invest. EIS. Tax breaks. Encouragements to not pay as much tax as everyone else.

Business. LLPs. A legal entity construct. Limited company corporate partners sheltering income until tax rates come down (Hedge Funds favourite tax avoidance scheme). Tax paid until another day.

These are all legal. Enshrined in law. Some are badly drafted and its a lawyers game of fun. We read in the FT that Stamp Duty is optional. Instead of selling your freehold house at £4m, sell it as 25 year leasehold house with an option to buy the freehold in the future (via side letter) at a £1. Value of property falls to a £1million and STD falls into a lower band.

If the laws are badly drafted why should the UK citizen say "Oh dear I am sure they didn't mean that so I will send some extra tax revenue to my government because I am a nice person". Tax avoiders should be celebrated for showing up the inadequacies of the law and why more rules equals more opportunities to get round them.

The new tax year has started and like many in the UK we will be celebrating our democratic right to decide when we should pay tax. Just as much as I can choose not to buy a new car and pay VAT at 20% and instead buy one that is 6 months old with no VAT to pay, to piling in provisions and expenses into my LLP and Limited Companies and ensuring my IP agreement and patents are locked up in a safety deposit box in Ireland, I look forward to seeing the price of iPads and Kindle books double in price as the UK government taxes Apple and Amazon for trying to be smart arses.

Tax. Too much of it given to the wrong people to spend badly.

Today's shorts:
Tax Avoiding Trust Man who owns a large chunk of a large company says he shops at Primark (telegraph)

Today's longs:
David Cameron goes to Japan to learn how to manage debt (reuters)

Hedge Fund industry to go on strike because enough is enough.

Wednesday, April 4, 2012

Why dark corners are back in vogue

JP Morgan sales conference © fintag

News comments:
Following Ian Hannam's extraordinary FSA fine for blagging a bit too much, it is clear the FSA is losing the plot.

Whereas a few years ago 125% document lite mortgages were handed out under the FSA's watch, we learn the new mortgage code means 5 million Brits will soon be unable to remortgage when their deals expire because of new new Horse-Bolted regulations coming in will deem them homeless. Peer to peer lending, credit unions and are the new shadow banks which is where the FSA should be paying attention but it prefers in tackling a bit of blagging resulting in people's lives being destroyed and wealth creators wondering what is the point? Regulation has gone mad.

Yes, the FSA have been battered because they were too scared to regulate the big banks and concentrated on the little people (a bit like HMRC, the police, the list goes on ...) we are in an era where the big boys (Hannam included) are being attacked for a few lines in an email.

The upshot of course is dark corners are now back in vogue. I am being inundated with requests to join Private Clubs with no CCTV or any surveillance (cash only entrance fees and no names). The reason is we all like to talk and a bit like during prohibition, honest people eventually say enough is enough.

Having had the privilege on a number of occasions to witness the man in action (he is a cross between Bear Grylls and Ena Sharples), he has created much wealth to this country. His crime was a bit too much blagging - he didn't set out to rip innocent people off or money launder and the fine is excessive.

Private clubs are the new black.

Today's shorts:
Disgraceful (efin)

Today's longs:
Private Clubs bursting (standard)

David Cameron losing the plot (reuters)

FSA (with Nick Clegg's help) to ban selling completely.

Monday, April 2, 2012

Diamonds are forever

Diamond Geezer © fintag

News comments:
I know you are all piling into Equities but my latest long interest is Diamonds.

Until they find a way to make synthetic diamonds, these easy to hide Madoff loving assets are running out and prices will continue to rise. Despite not yet being at 1980s prices, probably because Gold is the new bling, they look like an interesting asset class.

So I reckon it is time to go long safety deposit boxes. In the UK these have diminished which is ridiculous as the Americans will soon be depositing physicals at a rapid pace. Why? FATCA.

The new American imperialism whereby the rest of the world will not deal with Americans because they could be IRS terrorists means digital footprints leaving an audit trail for tax hunting agents to follow will create a new cold war.

Welcome to a new world of paper, ink and safety deposit boxes full of diamonds.

Of course us Brits will also be following given the latest Big Brother news that everything I type and do is being sent to the UK security services.

The new paper based fintag launches next week and will be handed out at Tube stations by small children.

Today's shorts:
India retro taxes not popular (telegraph)

UK to build largest database of unretrievable data (bbc)

Dark Ages 2.0 (ftadviser)

Today's longs:
Not dead until you are dead (telegraph)

Boxes (safe)

Damien Hirst physicals to be nationalised by the UK Coalition.