Arsenal

I really wonder why Adebayor hasnt left Arsenal already!

Day that mob justice worked

The link is here

sorry for the lack of posting!

Windows 7

A quote from the BBC:

We were able to shave 400 milliseconds off the shutdown time by slightly trimming the WAV file shutdown music
John Curran, Microsoft UK's director

Wow that sort of time saving will certainly make me shell out for one! Time is money!!

A short defence of bankers

This is a short post, the inspiration of which came from watching the news!

What made me wonder was why is there quite widespread castigation of bankers but not lawyers? Of course there is a case to answer as to the causes of the recession, what I am pondering is the salary aspect.

• The median salary for bankers and lawyers must be fairly similar at most levels, I would have thought that most senior lawyers and QC's earn very similar levels of income to a investment bank MD or Partner at a hedge fund
• At least banking has made big efforts to incorporate gender equality into the system, are we still waiting on a female member of the House of Lords? (I don't think pay equality is anywhere near close though)
• Also race hasn't really proved to be a deterrent to a career in banking Stan O'neil from ML and Anshu Jain from DB is evidence of this.
• Also its much less of a old boys club, whilst there are many Oxbridge grads in banking the senior levels are peppered to a higher degree with other university graduates, unlike the QC class.

I know al ot of my evidence is incomplete but I don't suspect I am far off the mark.

I guess the key is the lawyers ability to keep their mouths shut and heads down!!!

Chris

Google Street View

I really don’t understand the opposition to Google Street View. They say it’s a gross invasion of privacy, but Google is just taking the photo’s from the street, you see nothing that you wouldn’t see if you had been bothered to get up and go see!

As far as I see it if you were to ban Street View you should ban people been out on the street, there should be a curfew because the public should not be able to view things from public spaces. Now that is a restriction on civil liberty, not been able to take a photograph is another example (how do you get proof of a police officer doing something wrong). The protestors are barking up the wrong tree.

What’s the difference with Street View and someone who has a photographic memory?

Protests

I have very strong views on the protest today, which I will blog on in the future however after keeping an eye on the BBC coverage I saw a brief interview with one of the senior members of WarOnWant. I went to their website, and suprisingly disagreed with most that was written. I decided to send them an email which I reproduce below, any reply from WarOnWant I will of course publish to give them right of reply.

Dear Sir or Madam,

I saw one of your colleagues on the
BBC coverage of today’s riots.

I would like to question you on the accuracy of your campaign on the Financial Crisis. However I would like to point out that I do not think the actions of the banks are 100% right, however I do think that they are more right than some of the misguided and ill thought out anti-capitalist campaigns.

First of all from the synopsis on your website I think that you clearly misunderstand the important role banks play in an economy. I wonder what you expect would have
happened if the UK banking system had collapsed late last year. It very nearly did and survived only with the aid of the UK Government. Please also don’t forget that this crisis is global and that several major US banks also came very close to collapse.

I do wonder when people make claims about “bailing out the bankers” that they understand that the risks to the population at large were massive, and that is the sole reason why the governments stepped into prop up the banks. It is not just Fred Godwin who was bailed out, but your grandparents (who may have had savings at RBS), it was your local corner shop (who may have had a business account at RBS). You could forget your pension, you could bet your last pound (although that won’t be worth anything anyway because people would resort to bartering) that equity markets would have collapsed at least 75%, any bonds that you owned would be worthless, tens of millions of people in the UK would have seen their future retirement wiped out. The values of these assets would have collapsed because there would be no economy, no economic activity would take place. You wouldn’t be able to pay for goods at Tesco, Tesco wouldn’t be able to buy goods from there supplier, there supplier would not be able to buy anything from the farmer. You don’t need to be on dragons den to work out that the value of a company with no revenue and no profit is zero.

You say that “the poorest … struggle to make ends meet” but do you seriously expect them to be in a better position if there was no banking system?

You do not make this argument explicitly but it is implicit underneath your light touch regulation statement that bankers have been greedy in making profits. Now the generic argument here is that bankers made loans to people who couldn’t afford it. I do not defend this. What I do defend however is the notion that only one side of the deal is to blame. Do people not understand that when they enter into a contractual agreement , it is assumed that they know the risks involved in keeping up their end of the bargain. There was always a possibility that they could lose their job. If the person realized that they would have to pay £500 per month on a loan when they only have disposable income of £700 per month was unaffordable and they still
took out the loan then more fool them. In this last case, the banker does have a responsibility but so too does the applicant, and that is undeniable. Savers too make the mistake of frowning upon people borrowing money (read the comments section of any newspaper story commenting on a rise in BoE base rates) blissfully unaware that it is these borrowers who are paying the savers interest. The bank acts purely as a middle man putting buyer and seller together. This is how commercial banking works and this is how investment banking works. This IS a system that in general works, it just needs ‘tinkering’ around the edges. I agree stronger regulation is needed, so too is stronger risk management. At the same people need to be more aware of finance, how financial products work and how they are ALL interconnected. This is not a failure by one man as so many people try and claim but a system wide failure.

I would like to know how much impact you think the World Bank, IMF and WTO have on global trade. Most countries can and do flaunt these rules at will (developing and developed). The IMF is far too small to help most of the developed economies. There has been a strong debate that the IMF and World Bank which were born in a different economic era are no longer fit for purpose. You are correct that the IMF and World Bank are dominated by the words most powerful nations, they have provided most of the funding for these organizations. Who in your ideal scenario would you have as “in control” of these organizations? Do you realize that the IMF’s founding purpose was to stop currency crisis? It wasn’t to act as a development agency, it was set up to act as a surveillance unit to monitor its members countries fiscal and monetary policies.

I would be keen to find out more about how you envisage that the system “based on principles of public benefit … through democratic control” would work. It seems to me to bear very strong similarities to communism, which unless you missed history lessons as well as economic lessons at school you will know that as a system it failed.

As George Orwell wrote: “Four legs good, two legs bad”

I look forward to a constructive dialogue

Robert Pestilance

My favourite topic: The brainless scaremongering of the dumbed down Beeb reporter Mr Robert Peston.

To be fair, as I have said before I think that there are a lot of people who are been affected by this crunch (and incidentally were affected by the bubble but everyone likes to take a free ride there) who don't understand finance, which is fine and I think as a finance professional we as an industry have a responsibility to educate people. i think Mr Peston does a good job of making things simple to understand but in doing so he misses the point.

As is often the case the beauty of finance is in the detail and I think that Mr Peston glosses over it too much. Take for example his blog entry talking about China's stimulus package:

Wen Jiabao announced that China's budget deficit this year will be 950bn yuan.
That sounds like a big number - and it is an all-time record for China.

But, in relative terms, it's a flea bite compared with public-sector borrowing in the
UK.

Converted to sterling, that 950bn yuan is equivalent to roughly £100bn.

If you just read the first paragraph you could be forgiven for mistaking the world was about to end. But wait a minute, that's in Yen, how many yen could I get for a pound, oh I think I could get roughly 9.5 Yen for each of my sterling.

To be fair I'm been picky, if he didn't include the words "That sounds like a big number" I would be OK. But he did and it just illustrates a growing contempt on his part for the rational argument.

Great article

The blog Popular Delusions is brilliant and yesterday afternoon didnt disappoint definitley worth a read

Goodwin Update

As Daniel Finelstein writes: it is a nauseating sight which brings with it mob rule

This MUST be stoped

Goodwin

I despair of this Government, I think that their short sightedness will hurt the country.

I am writing in reaction to the news that Fred Goodwin from RBS has been asked to return his pension. Now let me set out very frankly from the beginning that I am not supporting Fred Goodwin personally, I think he ran RBS badly and I think it got far too big. As Chris Dillow writes:

“if centrally planned economies are a bad idea, how come centrally planned companies are a good one?
Well, it turns out that RBS was just like a centrally planned economy, complete with the suppression of dissent and cult of personality.”

Neither do I disagree with the right that every human has to ask a question for someone to something that they in their opinion consider right (although there has to be restrictions on this). What I get so fed up with is the knee jerk reaction of Alistair Darling (and by reference Gordon Brown) have made by ordering lawyers to look at stopping Fred Goodwin’s 650k GBP a year stipend from RBS, a payment he is legally entitled to. Why bother with the lawyers? Why not just order it confiscated?

This all stems from the fact that New Labor have realized they have to stop been so right of center and more left wing and with that the irresponsibility that tends to come with the territory. Let’s not forget that Mr. Brown was at the Treasury for ten years prior to his Premiership. Ten years is a long time. Ten years is a long time to be in charge of a department that is directly responsible for the FSA, the agency that was responsible for oversight of the banks that he is now criticising. Lets also not forget that he was partly responsible for the monetary and fiscal regime that contributed to the excesses.

Do citizens have any legal rights anymore? Gone are the days that you could not be tried for the same crime twice, the state can put you in prison without charge, you are not allowed to photograph policemen, we are blanketed by CCTV, I can’t get to work without appearing on at least nine CCTV cameras. We have civilians been extradited under anti terror legislation, we have MP’s bugged under anti-terror legislation.

When will this stop, this is far more data than Stalin or Hitler ever had on its citizens. But it’s ok, we know that the Government can’t look after its data, they leave it on Trains.

Follow up on bonus'

Oliver Kamm, who writes a very good blog at The Times has a good post on the issue of bankers bonuses. He suggests that like asset managers, bankers should be paid on a risk adjusted basis.

So if a banker takes a big risk which pays off then he would get paid less than a banker who took less risk but made the same amount of cash. What confuses me is who actually is a banker? Do they mean traders, do they mean M&A advisors? I dont think that the journalists commenting on the crisis actually know themselves.

Which brings me to my favorite journalist de jour, Robert Pestilence, Tosser.

I am sick of his alarmist views been taken so seriously. Fed up. Granted he does a good job of making something complex understood by the masses (in my previous post I mention I dont think that its difficult to learn finance, no one is born a lawyer in the same way no one is born a financier) but in doing so Mr Pestilence diverts the uninformed reader down a very partial view. The Daily Mail does the same thing, they just dont have a clue.

Take for example Mr Pestilence's post on his blog a couple of days ago talking about the Barclays results check out update 2, he gives the alarming impression that something is amiss with Barclays derivative book but then explains it’s because they are reporting a gross not a net position. Which is something different entirely, basically what Barlcays have done is this, I owe Bill Gates $100bn but Melinda Gates owes me $98bn, I have a gross exposure of $198bn alot of money, but I actually only owe $2bn, alot of money still but 1% of what the gross number is, so from a risk perspective you have a totally different view.

If people are claiming that we the people can sack the bankers because we the people own the banks then why on earth cant we sack this idiot? I pay my license fee, I pay his wages. If I had my way he'd be hung drawn and quartered!

Banks and Renumeration

I drove back from Leeds this weekend after spending the weekend at my Grandparents sliding all over the place after all the snow we've been having in the UK the past week.

So been stuck in a car for three and a half hours was probably not the time to be sent around the bend by the idiotic party political views of this Government. I am talking of course of the news today that Alistair Darling is ordering an independent inquiry into the way banks pay bonuses. I think this is a stupid decision, I don’t think it’s the stupidest, unfortunately we all take collective responsibility for that, I for not voting at the last election and everyone else for voting Labor!

I think it’s a stupid decision because it simply appeals to the people who don’t really understand what goes on in Finance. I'm not saying that they are incapable of understanding it, I'm just saying that they have not been inclined to take the time to understand it, in the same way I have never taken the time to understand medicine, I am not objectively qualified to diagnose cancer in someone, I have not taken the time to understand law and court procedures I am not qualified to comment on legal cases (more on this in a later blog).

Finance is not difficult, but the problem as I see it is that there is no minimum bar to pass before been able to become a finance professional, like a lawyer has to get called to the bar, the medical student has to become a member of, in the UK the British Medical Association, any old bucket shop can open and sell to the public (although to be fair the FSA and SEC do a good job of restricting this) the upshot of this is that everyone has a view, and whilst it takes two views to make a market, people tend to only ever buy stocks. This means that while they tend to do well in bull markets such as the one we 'enjoyed' from 2003 through to mid 2007 they tend to lose their shirts in bear markets.

I have no problem whatsoever with people losing money in the stock market, I could not care less. I have lost money previously and I have made money. What people tend to forget is that making money and losing money are two sides of the same coin. They tend to ignore that, they tend to ignore all of the other contributing factors that make a bull market, primarily a herd mentality, and blame the bankers. The politicians who in my view don’t have a clue, then try and jump on the band wagon and conjure sympathy from people who have lost their savings. It’s as if these people assume that the stock market was a license to print money. It isn’t, no financial asset is, EVERY financial asset carries risk, and the risk that others will not value the asset at the same price you do.

This brings me to why I think that the independent inquiry is a bad thing, politicians tend to be the jack of all trades and the master of none, this coupled with the fact that they owe their financial stability to the good will of the people leads then to be very partial observers of what is going on. Robert Pestilence alarmist views are testament to this.

Finance pays good wages to those who work in it, I will not go into the debate of should nurses earn more than bankers or footballers, these arguments miss the point. Finance pays high salaries for a reason; the reason is that they have a high marginal product. In a competitive economy over time person earning £100,000 brings more value to an economy than someone earning £50,000. Twice as much. Some people messed up in the past few years, and I do not defend them, they have probably (hopefully) lost their job, they are paying for their past mistakes.


The fact is that markets are efficient, and economic agents respond to incentives. The UK Government is in a mess, it now owns most of UK banking, both retail and wholesale. The Government HAD to step in to stop the banks collapsing; they play a pivotal role in the economy. They also have a significant amount of money at risk, several billion pounds, that’s alot of cash. They need high quality people to get them out of the mess UK plc is in. They cannot get these people by making statements that indicate they will not pay people well. If I can earn more money by working at a hedge fund and pitting my wits against every other idiot in the market then I can by earning the gratitude of the British people by saving the banks, I will gladly chose the former.

Voters have short memories, they forgot that we've had crashes before, money talk’s money may be fickle but it is the universal measure of someone’s ones ability and the value other place in that ability.

First Blog

This is my first attempt at a blog!

I have found as I've got older, that I have more things I get angry about. No angry is the wrong word, there are more things that I have an opinion on, be that in the field of politics, football or just life in general and instead of simply boring my girlfriend with this I have decided to give her and you the option of listening to my views if you so choose! What is worrying is that I am only 25 so what hope do I have for not becoming a grumpy old man!!!!

Chris