Started writing this post before heading off on hols but never had the enthusiasm to finish it. Decided to whirl away and see where this takes me; there's no agenda here, just what they call in writing books "stream of consciousness". One great thing about the internet these days is that browsers come replete with spell checkers. This is good for someone like me who can't remember how to write words out properly anymore, or take the time to bother looking them up to check for both spelling and meaning. It does mean that writers become lazier and perhaps don't take the time that's needed to vet their work.
One blog I particularly like is Editorial Anonymous; sharp, witty and sometimes plain honest, it tells the story of one editor's fight with the would-be hoards of writers out there, all who have the one-good-story story in their fight for publication. The one I've highlighted quite tickles me; it tells the story of human nature. We all want to say we're connected to someone important. That our father's second cousin twice removed who hitched a ride to NY on a tramp steamer is now the 2IC (second in charge) of a major hotel chain. Translated, that might mean they're responsible for the night shift in a youth hostel and as there are only two staff members they are technically correct in that statement. So we claim to be connected to people. I've met Mick Jones from The Clash and he's a lovely bloke. It's unlikely that we'll meet again and I don't think I did much to change his life.
This week I'm feeling supremely happy. Over the last twelve months I've felt totally crap. As in can't get out of bed, can't sleep properly at night, struggle to stay awake at work, no energy and just general malaise. Two weeks ago I stopped eating bread and drinking beer. I still enjoy wine but I've totally cut all yeast based foods from my diet. The results are astonishing to me. I'm full of energy. Tonight I've cycled 22km to get home from work and am just bursting with happiness to the point that this blog may roll on and on. I can't believe how much of a difference it makes being and feeling fit and healthy. Long may it roll on. Next I'll be filling out list of things to do and actually doing them.
Saturday, October 11, 2008
Friday, October 10, 2008
Where's my shorts?
Short selling. The practice of selling a security that you don't own, borrowing it to cover your position, and then hoping to either buy it back for less than you paid or, in the best situation, the company goes bust, you return the shares you borrowed and trouser the sale of shares that never were yours.
Even in the good times of a bull run, this is a morally dodgy practice. I agree that it helps drive out issues with a company, it allows the investment industry to focus on the underlying performance of the shares rather than holding them in the hope they'll be ok. Yet I can't help but feel that the ability to sell something you don't own and make a profit of it is wrong.
Of course, borrowing from an argument the good Robert Peston at the BBC used, there's the interesting moral dilemma that those encouraging the practice were the ones doing the most bleating when the practice started to hurt their businesses.
In the current turbulence, the short sellers returned with a vengeance, intent on driving down stocks and making money. But there's more to it than that. Ordinary share holders want to sell out of their positions. They've seen companies like Bear Stearns and Lehman go bust and people have lost all their money. In the UK, other banks nationalised and the savers who were given shares in them have lost all the money they were given. Perhaps none of the "value" was real but these people felt rich, they felt like they had some money put aside for a rainy day. Now most of them have nothing. As the market fall, others feel it might be best to get some real money out while they can.
Don't blame the shorts for the trouble the banks are in, they're just doing what the markets allow them to do. If you're looking for culprits in this bonfire of the insanities, you should like to the men in sharp suits.
Even in the good times of a bull run, this is a morally dodgy practice. I agree that it helps drive out issues with a company, it allows the investment industry to focus on the underlying performance of the shares rather than holding them in the hope they'll be ok. Yet I can't help but feel that the ability to sell something you don't own and make a profit of it is wrong.
Of course, borrowing from an argument the good Robert Peston at the BBC used, there's the interesting moral dilemma that those encouraging the practice were the ones doing the most bleating when the practice started to hurt their businesses.
In the current turbulence, the short sellers returned with a vengeance, intent on driving down stocks and making money. But there's more to it than that. Ordinary share holders want to sell out of their positions. They've seen companies like Bear Stearns and Lehman go bust and people have lost all their money. In the UK, other banks nationalised and the savers who were given shares in them have lost all the money they were given. Perhaps none of the "value" was real but these people felt rich, they felt like they had some money put aside for a rainy day. Now most of them have nothing. As the market fall, others feel it might be best to get some real money out while they can.
Don't blame the shorts for the trouble the banks are in, they're just doing what the markets allow them to do. If you're looking for culprits in this bonfire of the insanities, you should like to the men in sharp suits.
Thursday, October 9, 2008
Feeling lucky?
I'm contemplating what might happen if I won a major prize in a lottery draw in the next week or so. Let's suppose, for the sake of argument, it's £2 million GBP. At the moment, that's about USD 3.5 million or about EUR 1 million.
The first worry is, would the prize fund be able to send the money to me? After that, would I be able to get the money out of my bank in time to spread around the risk? But thinking about that makes me realise that in the UK there are only eight banks I could safely deposit my money in, and that the maximum guarantee is £50,000 per bank holding company. So that rules out one of RBS and NatWest.
So I'd probably need to find a few European banks that I could open accounts with and slosh some money over to them. Perhaps an Irish bank would be alright as they're fully covered for the next two years.
Then what? I'm sitting long cash when the world's banking system is going to the dogs. Perhaps I could just withdraw £1,000 per day from each of these accounts and stuff it in a safe spot in the house. After all, no one would know it's there.
If I've done all of this, I'll have plenty of money and it won't run out. But what happens if the banking system breaks down completely? What use will there be for money? Will it be possible to take these crisply printed pieces of paper with their sophisticated fraud prevention and use them for anything?
What if the financially worst happens? We'll still be here the day after but will it be like those Armageddon films of the 80's like Mad Max where the world goes to pot and it's everyone for themselves?
This keeps me up at night. I think I'll build a chicken coup in the backyard.
The first worry is, would the prize fund be able to send the money to me? After that, would I be able to get the money out of my bank in time to spread around the risk? But thinking about that makes me realise that in the UK there are only eight banks I could safely deposit my money in, and that the maximum guarantee is £50,000 per bank holding company. So that rules out one of RBS and NatWest.
So I'd probably need to find a few European banks that I could open accounts with and slosh some money over to them. Perhaps an Irish bank would be alright as they're fully covered for the next two years.
Then what? I'm sitting long cash when the world's banking system is going to the dogs. Perhaps I could just withdraw £1,000 per day from each of these accounts and stuff it in a safe spot in the house. After all, no one would know it's there.
If I've done all of this, I'll have plenty of money and it won't run out. But what happens if the banking system breaks down completely? What use will there be for money? Will it be possible to take these crisply printed pieces of paper with their sophisticated fraud prevention and use them for anything?
What if the financially worst happens? We'll still be here the day after but will it be like those Armageddon films of the 80's like Mad Max where the world goes to pot and it's everyone for themselves?
This keeps me up at night. I think I'll build a chicken coup in the backyard.
Wednesday, October 8, 2008
Hey Darling, where's the money gone?
Mr Darling, what a great name to call the man in nominally in control of the UK's purse strings. Darling what are you good at? This might be the question you ask of him.
The man's clearly under old Gord's thumb. Doesn't seem to be able to make a decision for himself and when the big announcement came today that we, the undersigned tax payer of Her Majesty's Government of the United Kingdom, are going to foot an unspecified bail out of the banking sector, there stood Gord making sure he was in the limelight for this one. Our beloved Darling was just a passenger; he couldn't even get the agreement hammered out in time for the market to digest it. This all seems quite amateur. But then the guy's a lawyer by training, so he's clearly not used to the idea of doing a proper job properly. Day after day of dithering and today we're delivered a document that dithers about handing out money to the banks. There are no specifics in the document. Merely a statement that says the Government will hand over £50 billion or so of my money to some wunch of bankers in return for which they want to say how the banks are run and who gets paid what.
This will work, but only because people want to believe it. Because we need the confidence to ensure that we're not back to bartering chickens and livestock. If you want to look at the origins of money, read this article from Exeter University.
Back to reality, we're going through a period of "deleveraging". To the average person on the street, this simply means that the banks are going to pay back lots of the money they've borrowed. Only it's happening slowly. And it's quite painful. Eventually the banks will return sufficient money to their depositors and shareholders and shrink down the size of their overall debt. This process will take about ten, that's right 10 ten, years to achieve. In the meantime, you and I, the taxpayer, will be footing the bill to prop these banks up.
The problem with Mr Darling's proposals, apart from the mere detail of how they will be implemented, is that it's going to be very hard for the banks to make much money out of the system. This is good and it means that we're not going to be making money like we used to. More to the point, we're not going to be making UP money like we used to. The Government is going to print it for us, not the banks.
Then there's the question of Tier 1 capital. What does this mean? For those of us lucky enough to own a house, it's quite similar. If you "own" a house, you probably took a mortgage from the bank. So technically it's yours the day you make your final repayment. If you're living in that house you know that there's always money going out, utilities, rates, refurbishments and whatever else you spend on keeping your house in order, so it costs money to own it. Tier 1 capital is similar; it's the basic investment a bank makes to keep it going. So if you continue to add more money to your mortgage, the net amount of money you get back will be diminished and if you take too much, you'll owe money to your lender. This is just the same for Tier 1 capital. This money allows the banks to fund their daily operations and needs to be readily at hand to cater for the lumps and bumps in the process. Spend too much of this and you run out of money, then you go bust.
Right now, us ordinary folk on the street can just hold our breath and hope that Mr Darling's not lost our money down the back of the sofa.
The man's clearly under old Gord's thumb. Doesn't seem to be able to make a decision for himself and when the big announcement came today that we, the undersigned tax payer of Her Majesty's Government of the United Kingdom, are going to foot an unspecified bail out of the banking sector, there stood Gord making sure he was in the limelight for this one. Our beloved Darling was just a passenger; he couldn't even get the agreement hammered out in time for the market to digest it. This all seems quite amateur. But then the guy's a lawyer by training, so he's clearly not used to the idea of doing a proper job properly. Day after day of dithering and today we're delivered a document that dithers about handing out money to the banks. There are no specifics in the document. Merely a statement that says the Government will hand over £50 billion or so of my money to some wunch of bankers in return for which they want to say how the banks are run and who gets paid what.
This will work, but only because people want to believe it. Because we need the confidence to ensure that we're not back to bartering chickens and livestock. If you want to look at the origins of money, read this article from Exeter University.
Back to reality, we're going through a period of "deleveraging". To the average person on the street, this simply means that the banks are going to pay back lots of the money they've borrowed. Only it's happening slowly. And it's quite painful. Eventually the banks will return sufficient money to their depositors and shareholders and shrink down the size of their overall debt. This process will take about ten, that's right 10 ten, years to achieve. In the meantime, you and I, the taxpayer, will be footing the bill to prop these banks up.
The problem with Mr Darling's proposals, apart from the mere detail of how they will be implemented, is that it's going to be very hard for the banks to make much money out of the system. This is good and it means that we're not going to be making money like we used to. More to the point, we're not going to be making UP money like we used to. The Government is going to print it for us, not the banks.
Then there's the question of Tier 1 capital. What does this mean? For those of us lucky enough to own a house, it's quite similar. If you "own" a house, you probably took a mortgage from the bank. So technically it's yours the day you make your final repayment. If you're living in that house you know that there's always money going out, utilities, rates, refurbishments and whatever else you spend on keeping your house in order, so it costs money to own it. Tier 1 capital is similar; it's the basic investment a bank makes to keep it going. So if you continue to add more money to your mortgage, the net amount of money you get back will be diminished and if you take too much, you'll owe money to your lender. This is just the same for Tier 1 capital. This money allows the banks to fund their daily operations and needs to be readily at hand to cater for the lumps and bumps in the process. Spend too much of this and you run out of money, then you go bust.
Right now, us ordinary folk on the street can just hold our breath and hope that Mr Darling's not lost our money down the back of the sofa.
Tuesday, October 7, 2008
No confidence
While this combination of tsunamis, cyclones, hurricanes and other man made disasters hover over our financial markets it's easy to feel that tomorrow we'll be back to hunting and gathering to make a living.
At least, that's the view from here in the UK as our febrile government continue to cluelessly dick about while the country's economy goes into meltdown. There's a rotten core in the ruling party which leaks information like a dripping tap. Only the tap's now gushing forth half-baked plans and grand statements that offer no substance about how to solve this crisis.
The BBC's workaholic financial editor, Mr Robert Peston, is doing a great job of grabbing hold of the data and blogging to the world. It's like he has inserted an intravenous drip that's fed by the inner workings of this government. While his scoops are the result of hard work, one starts to wonder how much the public interest is served by what he tells us. We could do with a let up in the rate and morbidness of these publications; perhaps Mr Peston could wait for the Government to make a decision before he tells us what it's going to be? At least this way Gordon's boys might think a bit and decide they actually need to do something as opposed to the current sound bites of crap flowing Downing Street.
With the Brown government on the ropes in the opinion polls, the national debt approaching 60% of GDP and not offering any clear way out of this mess, perhaps Parliament will have the gumption to call for a confidence vote. There's a constitutional precedent for this, set in 1782 when the Brits took a beating at Yorktown in the first American war. The wording was that Parliament "can no longer repose confidence in the present ministers". Words that are still apt today.
We, the citizens of the United Kingdom, should not look to our Parliamentary leaders for a solution to this crisis. The solutions will come from others. From the opposition political parties, from the leaders of the business communities, including our financial institutions, and from ordinary people who need a change from the leaden footed fools in charge.
There can no longer be confidence in the ability of the Prime Minister of the United Kingdom and his Chancellor to solve the economic nightmares we are living. After all, serious times demand serious people to make serious decisions.
At least, that's the view from here in the UK as our febrile government continue to cluelessly dick about while the country's economy goes into meltdown. There's a rotten core in the ruling party which leaks information like a dripping tap. Only the tap's now gushing forth half-baked plans and grand statements that offer no substance about how to solve this crisis.
The BBC's workaholic financial editor, Mr Robert Peston, is doing a great job of grabbing hold of the data and blogging to the world. It's like he has inserted an intravenous drip that's fed by the inner workings of this government. While his scoops are the result of hard work, one starts to wonder how much the public interest is served by what he tells us. We could do with a let up in the rate and morbidness of these publications; perhaps Mr Peston could wait for the Government to make a decision before he tells us what it's going to be? At least this way Gordon's boys might think a bit and decide they actually need to do something as opposed to the current sound bites of crap flowing Downing Street.
With the Brown government on the ropes in the opinion polls, the national debt approaching 60% of GDP and not offering any clear way out of this mess, perhaps Parliament will have the gumption to call for a confidence vote. There's a constitutional precedent for this, set in 1782 when the Brits took a beating at Yorktown in the first American war. The wording was that Parliament "can no longer repose confidence in the present ministers". Words that are still apt today.
We, the citizens of the United Kingdom, should not look to our Parliamentary leaders for a solution to this crisis. The solutions will come from others. From the opposition political parties, from the leaders of the business communities, including our financial institutions, and from ordinary people who need a change from the leaden footed fools in charge.
There can no longer be confidence in the ability of the Prime Minister of the United Kingdom and his Chancellor to solve the economic nightmares we are living. After all, serious times demand serious people to make serious decisions.
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