30SEP08:
31DEC08 INDICES:
FTSE100:3550
DOW30:7550
# HEDGE FUNDS:4425 30JUN08: Oil to be USD200 by 30OCT08 USA Inflation to be 7.5% by 30OCT08
...oops 23APR08:
Next Rights Issue:
HBOS...yes
All & Lec ...
...1 Nil. 17APR08: Oil to be USD127 by 30SEP08
...16MAY08 losing my touch 27FEB08:
2 Banks go bust by 30JUN08
BS down, Lehman (a bit late I know) 20NOV07: Northern Crock to be sold for 15p
Nationalized 01NOV07: Oil to be USD103 EOM
...peaked too soon 08OCT07:
SEC to fine Goldman for pricing issues
...still waiting 15JUN07: ML to buy-out BS
JPM got there first 06JUN07: The Big Crash: 17OCT07
...well it's here
The incompetent banks have had it easy for many years. With large balance sheets and clever insiders to baffle regulators, a few fines here and there have had little impact on controlling their exuberance. This really annoys the regulators but there is now an opportunity to really sort out these self serving institutions that we all rely on. It maybe a bit late but the regulators are out in force cleaning up the horse mess after it has bolted.
Today we look at regulators, cars that have no regulators and a standard regulation of FiNTAG fare.
NOBEL PRIZE WINNERS WARN FINANCIAL SYSTEM IS STILL NOT OUT OF THE WOODS
A top caste of Nobel Prize economists has warned that the world's financial system may not start to recover for at least another year, leaving banks at mounting risk of an insolvency crisis.
"There is a tremendous amount of de-leveraging still necessary in the United States and Europe," said Myron Scholes, the father of complex derivatives.
"I'm not exactly sure when it's going to end. There are many financial institutions that need to add capital or sell assets, but it's getting more difficult," he said, at the annual gathering of Laureates on Lake Constance hosted by Sweden's Riksbank.
Fintag says Even the smartest can look pretty dumb. If stating the obvious needed a sponsor then this is the man to do it.
The heads of mortgage origination and securitization at Lehman Brothers have left the bank after it cut thousands of jobs in the business, and as analysts have predicted that the bank will make more writedowns in mortgage-related securities.
Fintag says Lehman: in denial but now realising the economic reality that mortgages are just loans with collateral and it is a basic business model that was turned into a complicated one with too many people.
I had lunch with a senior person (actually they could have been pretty junior but the titles they give incompetent bankers is very confusing: Is an Executive Director more senior than a VP or Managing Director?) from the same said bank beginning with L and they confirmed what we already know. When the bulls are out and the bonus pot overflowing, risk management, product control and compliance bods all know which side their bread is buttered.
When the bonus pool is empty, these bods turn into the business prevention police and try to preserve their existence and jobs. It looks mightily worrying if an incompetent bank fires those who are controllers.
Confidential records and sensitive intelligence on tens of thousands of the country's most prolific criminals have been lost in a major breach of data security at the heart of Whitehall.
Scotland Yard is investigating the loss of the information, which was taken from the Police National Computer and entrusted by the Home Office to a private consultancy firm.
The data had been encrypted for security reasons but was decoded by staff at PA Consulting Group and placed on a computer memory stick that was subsequently lost. The device contains personal details and intelligence on 33,000 serious offenders, dossiers on 10,000 “priority criminals” and the names and dates of birth of all 84,000 prisoners in England and Wales. There is also information on an unspecified number of people enlisted on drug intervention programmes.
Fintag says Data is cheap. In the investment banking world the USB memory stick is a vital piece of equipment. A 64GB stick can hold a lot of files and CRM systems full of names and addresses of people who may or may not work in finance anymore.
This newsletter is emailed to thousands of people every morning. A number are bounced back because the email account is no longer valid. I have therefore some interesting statistics on the percentages of people being fired from all the banks. Actually its not that interesting.
MEMO TO THE PRESIDENT-ELECT; HOW MUCH CAPITAL DOES A BANK NEED?
If you still have not picked a book for the final week of summer, Michael Janeway's The Fall of the House of Roosevelt is a fine choice, especially with the nationalization of the GSEs looming. It's kind of surreal, don't you think, for the Democrats to be holding a nominating convention as two monuments to FDR's government intervention in the financial markets totter on the brink of failure?
We're not sure who's going to win the presidency in November, but we are very sure that the safety and soundness of the nation's banking system is going to be an issue in this election - perhaps as prominent an issue as energy prices. Indeed, we think that the president-elect will be forced to meet with President George Bush and both men will ask the Congress to move on providing funding and new legal authority to backstop the FDIC.
Fintag says The answer is simple: more than they have now.
LOOK OUT FOR THE 125MPH ELECTRIC CAR (BECAUSE YOU WON'T HEAR IT)
It looks as stylish as a Lotus, can outpace a Porsche 911 and is coveted by Hollywood A-listers such as Brad Pitt and George Clooney. But unlike the average super car, the Tesla Roadster is electric.
The £92,000 car, made in Britain and test-driven here for the first time this week, is being heralded as a breakthrough for the humble electric car, which has been lumbered with a reputation for being distinctly slow and unsexy in the past.
Designers of the Tesla, which has a top speed of 125mph and can accelerate from zero to 60mph in 3.9 seconds, hope it will appeal to moneyed motorists currently cruising around in Aston Martins, Porsches and Ferraris.
Fintag says My order is in and my other cars are up sale. At last we can say goodbye to these cars and welcome an eco friendly car that is faster than a Porsche or Al Gore. Nice.
Ian Morley (Corazon Capital): The gestation period for an elephant is about the same as a UK Financial Services Authority consultation. Ideally, a discussion paper goes out regarding some concern. Options are outlined with a request for input. Trade associations and other interested parties enter into a dialogue until some consensus or understanding of differences has been explored and action, or inaction (even regulators sometimes just leave things alone), is the result.
That is why the FSA's recent knee-jerk reaction over short-selling has been almost unprecedented. Short-sellers aim to profit from share price falls by selling stock they have borrowed in the expectation of being able to buy it back more cheaply.
As far as one can ascertain, the FSA consulted its own navel and then made a ruling.
Fintag says As I was mentioning earlier, the business prevention police always wake up when markets are down. Of course my opinions match those of Ian Morley who has read my newsletter. As an opinion former it is flattering. [Editor: Banks, cars and now we have the first review of something to do with hedge funds ....]
An activist hedge fund has taken an 8 percent stake in cable operator Cablevision Systems Corp., a regulatory filing showed Thursday.
Harbinger Capital and its affiliates reported in documents filed with the Securities and Exchange Commission that they own nearly 19 million shares of Cablevision.
The newly acquired stake makes Harbinger one of the largest shareholders of the Bethpage, N.Y.-based company.
NakedShorts' Obviousness Rule rule states that, even if things are obvious, they are not officially true until some official writes for, or talks to, an official news organization to tell everybody something that everybody already knows, but doesn't dare say.
Aug. 21 (Bloomberg) -- Incorrect securities pricing found at Credit Suisse Group AG, Morgan Stanley and Lehman Brothers Holdings Inc is more widespread and will be investigated, the UK's financial regulator said today.
The Fundamentally Supine Authority* said
"it will begin the probe next year"
after finding that securities valuations at a “large number” of London banks were “materially flawed or inadequate,” the agency said. The problems may worsen if banks fire compliance and risk officers, the FSA said. [Emphasis added]
Nice of 'em to give everybody a few months to uncook the books. That scratching and scuffling and splashing noise is the sound of Canary Wharf rats dumping old P/L documents and backup tapes into the River Thames. This may also come in handy.
Fintag says When those across the pond start bashing the FSA, you know that its authority has been diminished. I used to love the guiding principles approach. Now they have moved into a rules based business prevention approach that is not becoming of them.
PRIVATE EQUITY TO BEAT HEDGIES TO DISTRESSED ASSETS
Cash-rich private equity firms such as Apollo, Blackstone and TPG are set to sprint ahead of more cautious hedge funds in the race to snap up cheap distressed assets -- at least for now.
With pockets still full after raising billions of dollars during the credit bonanza, but their traditional leveraged buy-out market practically dried up, private equity firms will be forced to look elsewhere, and can hang on to distressed assets for years to make big returns.
Fintag says What? Most Private Equity funds are in real trouble. They don't sit on cash - they call their investors to give them cash when they are about to invest. PE always rely on a large debt / equity ratio. Without the debt, they have little fire power. PE funds are also very conservative and have mandates to fulfil. They are not hedge funds or SWF's with large mandates to buy and sell whatever they want. True they are closed but so are many of the large hedge funds.
Reuters. You can do better than this.
telegraph says " Hedge fund RAB Special Situations considers buyback "
One reason why the crisis that began to unfold in the spring of last year was inevitable -- and why it continues to worsen, contrary to the opinion of so-called "experts" (e.g., highly-paid Wall Street "strategists") -- was because a gargantuan house of cards rested on models, assumptions, and values that were, for the most part, baseless.
It was hard for the man on the street to know this, of course, because thoroughly-conflicted insiders, clueless academics, corrupt politicians, toothless regulators and various industry shills were running around claiming that they knew what was going on and that everything was on the up-and-up.
In reality, not only were they unaware of the many inherent flaws of this Wall Street-sanctioned Ponzi scheme, it has become become increasingly apparent that some of these operators had a role in helping to perpetuate the fraud. Based on the following report from Bloomberg, "'Large Number' of Banks Mis-Marked Assets, U.K. Regulator Says," it looks like the authorities are starting to close in on the miscreants (better late than never?).
Fintag says The only real experts are those who trade. Telling people what you think is easy. Acting on your opinions is more difficult. If it were that easy I wouldn't be writing this every day.
12 comments
Dan said ...
HAHAHA. Tesla. Sorry Finbar, but everyone around the car community knows that the car is a complete joke, is rife with problems, and has had more management changes than you've had encounters with trannies.
If being eco-friendly is your move, save yourself the money, headache and misery of a tesla and buy a Fisker Karma if you can get one. Then again, just hope that gas doubles or triples, and all of the plebeians will be off the road anyways.
22 Aug 08 - 09:19 gmt
anonymous said ...
Gosh Dan you know so much about absolutely everything; it must be so hard to be you, having to go one better all the time
22 Aug 08 - 09:58 gmt
anonymous said ...
No comment on Babcock? Surprised at how quickly they've started spiralling
22 Aug 08 - 14:52 gmt
anonymous said ...
Absolutely.
22 Aug 08 - 14:54 gmt
Finbar said ...
Looks like the Koreans have said yes! But will the US government say Yes?
22 Aug 08 - 14:55 gmt
Dan said ...
I do find that being omniscient has been a uniquely pleasant experience. That, coupled with a firm sense of unwarranted arrogance and superiority (or is it inferiority, hmm?) have made me a wonderfully cynical soul. Kind of you to have been paying attention, makes me realize the little people are listening. (TIC)
22 Aug 08 - 16:19 gmt
Moron said ...
dan, you poor b*stard:))
22 Aug 08 - 16:35 gmt
Regular VP said ...
I work for the FSA and just love scaring you hedgies. When I call you on the phone you are quiver like babies
23 Aug 08 - 09:50 gmt
catsick said ...
regarding your lunch with the leh junior, at catsicks we have seen defections to leh recently (if you can believe that this even happens) that seem to show trading heads are hiring their own risk management controllers ..... which is very perplexing on multiple levels .....
23 Aug 08 - 15:41 gmt
anonymous said ...
Regular VP; Yeah right...! Getting called by a spotty youth is really scary. Former Building Society auditors spending 3 years at the FSA so that they can get a better paid job at an investment mgr, hedge fund or bank is really scary....
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A top caste of Nobel Prize economists has warned that the world's financial system may not start to recover for at least another year, leaving banks at mounting risk of an insolvency crisis.
"There is a tremendous amount of de-leveraging still necessary in the United States and Europe," said Myron Scholes, the father of complex derivatives.
"I'm not exactly sure when it's going to end. There are many financial institutions that need to add capital or sell assets, but it's getting more difficult," he said, at the annual gathering of Laureates on Lake Constance hosted by Sweden's Riksbank.