Friday 27 February 2009

Goodwin Update

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

This MUST be stoped

Thursday 26 February 2009

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.

Wednesday 11 February 2009

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!

Sunday 8 February 2009

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.

Wednesday 4 February 2009

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