Friday, October 26, 2012

Short Debt Long Pay-As-You-Go

borro © fintag

News comments:
History is littered with debt induced booms and busts. Today's lack of debt is breeding a new pay as you go never own anything lifestyle.

For the last few years, low earners have gobbled up debt for the purposes of living a lifestyle they do not deserve. This retail market has enriched banks, brokers and loan sharks alike.

Corporates have levered themselves up for "investment seeking" purposes whereas in fact they were paying staff bonuses (banks especially).

The credit crunch is exposing creditors (Santander et al) and the regulators are making it worse. Liberals don't like bankruptcy so they have crushed yields to nothing and bizarrely when credit is so much in demand made it harder for the lenders to lend. Banks have to hold more capital and are now being told not to lend. People have gotten used to low rates such that a 1% hike will cause untold bankruptcy.

With the shocking bottom feeding off the vulnerable, it is only going to get worse when credit cards and overdrafts are withdrawn and the FSA kills off home ownership for 99% of the younger generation. Apparently only those earning (as certified by an accountant) GBP300k will be able to enjoy a mortgage whilst the rest will have to rent. Sofa surfing is no longer a temporary lifestyle for some; it is now the only lifestyle.

Long accountants, equity rich landlords, and

Many believe there is a global conspiracy to implement the Chicago Plan (the one where banks are no longer allowed to create money but governments are) and it is quite likely this is where we will end up unless someone spoils the funeral. No credit means snail like progress (in 1820 China was one of the poorest countries in the world) and most of us can't wait that long. So where will the new credit come from? Asia.

It is unlikely we shall see a time where a 23 year old graduate starting at Allen & Overtired is on GBP300k so to start a family she will have to encourage her parents to downsize from their house (and why not as they will never pay off their interest only mortgage and with the Clegg wealth tax stripping them of their pension it makes sense to live in a bedsit once again). (telegraph)

What is likely though is a Hong Kong bank offering no restriction mortgages to UK citizens such as a young lawyers with prospects and income. The demand will be huge and the risk will make sense (low rates, young people, time on their side).

Just like the Icelandic banks in the 2000s ripped apart the credit paradigm, Hong Kong banks will do the same. And India. And maybe Brazil too.

Asia is dependent on the West and needs its demand. Asian banks giving cash to consumers in the west who buy Chinese goods is a win win.

You thought the last credit bubble was big. The next one will be a tsunami. Its just that we may all be dead when it arrives.

Today's shorts:
California debt (bloomberg)

South Africa Police (bloomberg)

Greece (reuters)

Today's longs:
Greece lying continues (reuters)

Debtors prison to be created in the Shard.

Friday, October 19, 2012

Google: Season 3 review

guilty © fintag

News comments:
Google. A bit like a DVD boxset.

You watch the pilot and first season. It's new and exciting with twists and turns and has you gagging to watch season 2. The Wire. The OC. Homeland. Mad Men. Suits. Grays Anatomy. Downton Abbey.

But as you know, all good things whither and some faster than others. As the program matures and the script writers get lazy, interest starts to dwindle and we start hunting around on IMDB for the next fix. Borgen. Wallander. Spiral. Watching stocks are the same and Google is suffering from that dreaded 3rd album syndrome.

When Google destroyed Excite, Yahoo and Alta Vista with its easy to understand search engine and whacky misspelled name we found ourselves wanting more. We got quick ads, blogger, maps, YouTube, Android. And lots of other minor characters and sub plots.

But it is a competitive space and Google is no longer an imnovator. Take search. Google search is no longer the first place many of us go. We have apps now. Journalists prefer "real time" engines like or tweetdeck. Even Facebook is becoming a popular destination. Google search is effectively dead.

So where next for Google? A steady decline meez thinks. Microsoft managed to keep afloat with the corporate dollar but with cloud and cost cutting, who needs or wants Windows 8? But Microsoft will survive. But I am not sure about Google. Its services like Google+ and Maps are in just one of many, and the firm seems to spend more time on privacy and data collection issues than innovation. Android is open source and yields little income and its a company that does lots of things but none really well.

It also seems we are, without us realising it, at the start of something new. The old are going. My bug bears of the last few years are falling. Diamond. Coffey. Pandit. Even tax avoiding Starbucks.

But there are still some constants. Whereas Google appears to be faltering, perhaps cataching a cold from RIM, Goldman Sachs are still with us.

A disgruntled Goldmaner maybe trying to cash in on his time (and wasn't it dull? The anecdotes are pathetic) but this bank that never wants to die just gets stronger and stronger.

Google needs to watch and learn.

Today's shorts:
Sachs calls time (telegraph)

Printer prematurely ejects (guardian)

Today's longs:
41 year old joins fintag in the world of burnt out hedgies (sydney)

Diamond, Pandit and Coffey to join forces and create illiquid hedge fund.

Wednesday, October 17, 2012

How to make a billion and be useless at the same time

Bandit © fintag

News comments:
Fintag's favorite useless man has made his billion.

Whilst the world watched a couple of bickering presidents battle of over that job, Citi let go its most useless CEO ever - and he walked away with a billion. The man sold his hedge fund to Citi and enriched himself and his mates who then came over and ran Citi. He will almost certainly strip the bank of more cash as he leaves and sets up a new hedge fund to be seeded by Citi!

Money on the way in, money while in the job, money on the way out (pension et al).

Beers all round then.

Today's shorts:
Citi to be US only bank (seattle)

Citi has best cash flow forecasting (bloomberg)

Today's longs:
Pandit does his 5 years (reuters)

Citi continues cost cutting and is to rename itself C.

Monday, October 15, 2012

The banks are being run by socialists

why © swp

News comments:
Not that long ago you would find huff post / guardian readers working in the public sector. Places where they could enjoy spending other people's money.

Today you will find them working mostly in banks who have had a long tradition in spending other people's money. Long gone are the times when a barrow boy or an ex drug dealer could join a bank and make lots of money. The wild west cowboys making stuff up and selling it to fools and the great fun we all had are now history. The days of trading floor banter, attacking the markets from all angles for a turn and the cut throat profit taking at all costs are truly behind us. Investment bankers who were once dynamic, clever and risk taking have been replaced by CYA, No Risk Here librarians for whom change is as dangerous as turning on Radio 1 in case you are turned into a child abuser.

The Regulators were always seen as the red tape socialist business prevention police. And they still are. But in a strange role reversal, the banks are now hiring more of these sorts of people. Is it true that Credit Suisse has more compliance officers than front office staff?

Regulators are chippy socialists who couldn't get into the banks and now they are in the banks they are ensuring they say no to everything. Old business must be sold off and new business is a no no. These are the people who say no because saying yes, and it going wrong, is too much trouble. Risk is not healthy. The end of Man. The banks who have always detested the regulators are now embracing them whole heartedly. What is going on?

Regulators are putting up so many barriers to entry that its near impossible to launch any entity that could compete with the Banks. Getting FSA regulation is taking nearly 12 months! This lack of competition is damaging us all. The likes of RDR have reduced financial products for sale to Cash Only ISAs and with investors only wanting gold and London Prime because they are fed up and having to get utility bills certified every time they carry out a trade, it is clear the socialists have won and we have all lost.

What we need is more dynamic banks to help us out of this mess. Banks shouldn't be supported at all. Implied or otherwise. And certainly shouldn't be nannied.

Some of my best friends are socialists but I like difference, not the same:

BlackRock is hoovering up the biggest real estate boom in the world (bloomberg) because the banks are too scared to trade in anything that isn't liquid cash.

The Chinese socialists running their banks are petrified of the shadow banking sector run by capitalists (reuters)

Socialist banks are leaving Russia of all places because it is too competitive (ft)

Today's shorts:
South Africa (reuters)

EUcrats force banks to join trade unions (reuters)

Web 3.0 is apparently the new saviour of banking. Cashless payments, data collection, ownership of people and their finances. Governments are lovin' it. (finextra)

But this is not good enough. I am looking to launch a bank (although I am unable to call it a bank). It will be a private club and when you join you will sign a contract saying you do want to be regulated and have no interest in MiFID or AIFM or Banking unions. My new currency, the FiNTAG will be backed by my extensive wine collection. Supertuscan of course. And I will have no compliance officers.

Today's longs:
RBS to sell its branches to Shelter (guardian)

Jimmy Savile once worked as a trader at JP Morgan and was known for walking the floor.

Thursday, October 11, 2012

The IMF: One of life's moaners

International Moaning Federation © fintag

News comments:
Good to hear the IMF is doing its best to help shift the West into second gear (No Armstrong pun intended although I wonder if Virgin Active will be moving out its Livestrong cycles from my gym very soon?).

Well it's not really, is it?. The continual moaning of the IMF's "something must be done" is starting to fall on deaf ears. And about time too.

During the rampaging debt loving early noughties, the IMF were as silent as a BBC executive working with Jimmy Savile. Today it's all "told you so" and "get those debt levels down and growth up" and "sort yourselves out" without any clear solutions.

Capitalism is always a bit slow to correct downturns but usually quite speedy on the up turn. Unfortunately the IMF and non revenue earning non profit organisations who have never made a bean in their lives are hindering the upturn by sending out conflicting messages, colluding with market distorting regulators and other busy bodies in making the situation a whole lot worse.

When you are over geared, these are the options:

Push your head in the ground.

Pay it off.

Pay some of it off.

Refinance for a better deal.

Throw in the towel and start over.

Stall and pray for inflation.

Take Spain. It cannot print money so cannot pay its debts, refinance or wait for inflation. Its only option is to put its head in the ground and wait until its yanked out by the rioting unemployed or a CRA with a big stick bashing its backside. If it cuts, unemployment goes up, growth falls; it all seems so horribly wrong. But it's not. This is how it works. Cleansing for the future. Getting that body fat down.

The IMF wants the EU and US to follow the same growth path. Why? We are not all one happy family and we shouldn't be. Homogeneity equals dullness equals Brave New World. The UK is the best in the world when it comes to Advertising. Why should it want to share this business with the US who leads the world in technology? The Greeks produce the best olives - why would it hand over its expertise and land to the French who make the best wine? International trade is what makes our lives better but sometimes the rules of engagement have to change. China is slave labour and yet we are happy to buy another land fill iPhone. When China decides to put its wages up (oops they are going up), Apple will have to find slaves elsewhere. Capitalism is tough but then so is life. Let it get on. [Ed: Enough ranting].

The key to sovereign success is this:

Slash labor costs (reduce taxes like NI, red tape, working practice restrictions, minimum wages). Cheaper Labor means lower production costs.

Slash monopolies and state owned monoliths.

Refocus education and training onto the core skills a country has.

Provide tax incentives for foreigners.

And then you shall grow strong.

And guess which countries are doing or in the process of doing this?

Greece, Italy even Spain. For while the sick men of Europe are the PIGS, thanks to the IMF et al and other liberal do gooders, these countries could emerge as the powerhouses on the world in years to come. They are being cleansed. It happened to Germany and Japan after WW2 when the West poured billions into helping these countries out and look where they ended?

In the year 2030 the headlines will read:

"Greece refuses to bail out Germany"

"Spain enters into a Marshall Plan with the French"

"Northern Ireland joins Eire and closes doors to migrant Brits"

Today's shorts:
IMF moans again (bloomberg)

IMF says more debt needed to solve the crisis (reuters)

IMF says banks need to sell something (zerohedge)

Today's longs:
Gold (reuters)

Fintag to win his 8-1 bet on Romney being the next president.

Monday, October 1, 2012

More bashing means you pay

run to the hills © fintag

News comments:
400,000 Santander UK mortgage holders will be paying more this week. The reason being given is "regulation".

Despite interest rates being low, banks are being forced to hoard so much capital they are struggling to lend. On top of this, with compliance departments now the largest functions at most financial institutions, the costs of this business prevention are being passed down to the consumer.

Every new bash is a new bip that you and I have to pay.

With all this recent FCA rhetoric about wanting to crush asset managers fees, what happens next? Less choice and interns running Aberdeen Asset Management. RDR has destroyed the IFA business and with short selling restrictions distorting markets, every market is being ripped apart by regulators who want to control but don't know why. Regulation costs and as always is passed down to the consumer. Less choice and more expensive. The way things are going nobody who earns less than £250,000 will ever be able to buy an investment that isn't cash.

Of course not all banks are charging their customers more for regulation. Barclays has lowered its rates. (thisismoney).

So perhaps Santander's excuse of more regulation is not the true story. It knows it is the next Northern Rock and is grabbing income from mortgage owners who cannot transfer because of the lack of competition and "regulation" like credit checks, so it can sell its high yielding mortgage book to the UK government when it goes phut.

Nice trade.

Today's shorts:
Santander forces customers to pay for its bad debts (thisismoney)

More firings in the City (bloomberg)

Today's longs:
FCA not fit for purpose before its even started (bloomberg)

Hedgie is no Mitt Romney (dailymail)

Germany to leave euro (telegraph - Oct 2012)

Germany to leave euro (fintag - May 2012)

Vince Cable to head the FCA after next election.