Loans and Finance
Monday, December 29, 2014
As such a general election will have to be held, thus creating massive uncertainty over a new bailout and its membership for the Euro. Suffice to say this is the worst possible outcome for the Eurozone.
Wednesday, December 17, 2014
As I also predicted, raising rates would not work (as the UK learned to its cost when it raised rates to try to prevent it being thrown out of the ERM in 1992). The rouble is in freefall and Russia now faces imposing capital controls, further wrecking the economy.
The question that the West needs to ask itself is this, is pushing Russia to the brink of economic collapse really a sensible policy both economically and geopolitically?
Monday, December 15, 2014
The glitch occurred between 7pm and 8pm on Friday, and affected firms that use the tool RepricerExpress.
RepricerExpress software automatically reprices items of stock if a cheaper version becomes available elsewhere online and is designed to keep businesses competitive.
A Facebook group for those traders who last money from this has been set up.
Traders both online sellers and those who deal with billions of dollars of share trades etc should take heed from this!
Tuesday, December 09, 2014
Greece continues to fall now down over 8%, GR/GE 10y bond spread 47bps wider amid political uncertainty and potential snap elections
— RANsquawk (@RANsquawk) December 9, 2014
Friday, December 05, 2014
Premier Foods is of the view that the scheme did not break any rules under competition law. However, the government said it was "concerned by recent reports".
Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.
"We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.
We will now require you to make an investment payment to support our growth.
I understand that this approach may lead to some questions.
However, it is important that we take the right steps now to support our future growth."
"We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list."As to whether Premier can legally get away with this, is a question for legal experts.
However, what its suppliers needs to ask Premier is given Premier's financial problems, what happens to the "pay and stay investments" already handed over by suppliers if Premier goes bust?
Thursday, December 04, 2014
Putin calls for an "amnesty" on capital returning to Russia, meaning if people repatriate their money, they won't face tax/legal questions.This is all very well. However, if people were to heed the call to return their capital they would never be able to get it out of the country again.
— Paul Sonne (@PaulSonne) December 4, 2014
Wednesday, December 03, 2014
Tuesday, December 02, 2014
Thusfar the Russian Central Bank has staved off using capital/currency controls. However, there is growing internal political pressure within Russia to stave off the decline in the rouble.
It is of course only a short term solution to artificially prop up a failing currency, in the end market forces (or in this case, closed market forces) will have their way.
As to whether it is wise to destroy the Russian economy via sanctions, is of course another question. Whilst the West thinks that this will persuade Moscow to pull back from its Ukrainian adventure, the policy in the Kremlin is geared to a long term (ten year) siege. This is a very dangerous situation for both the global economy and global peace.
Let us hope that the policy makers in the West and in the Kremlin know have plans to pull back from the abyss.
Monday, December 01, 2014
The idea has merits, for those customers with the technology capable of video conferencing. However, it does pose security issues (eg there most certainly will be a risk of hacking).
Thursday, November 27, 2014
Is there another way that this hole can be filled?
Yes, governments can decommit from spending programmes that they have already committed to.
However, in the Lah Lah Land of the EU that will never happen.
Like it or not we are screwed by our membership of the EU, and most likely screwed if we leave it.
Tuesday, November 25, 2014
Andrew Roberts, RBS's credit strategist, is quoted by the Telegraph:
“We are seeing `Japanification’ setting in across Europe.In theory, as economic predictions are always "theoretical", either the ECB launches massive QE in which case it will buy bonds, or it won't in which case bond yields will collapse further.
We expect 10-year Bund yields to cross the 10-year Japanese government bond and we are amply positioned for such an outcome.”
Either way, in theory, bond prices will rise.
Theory and reality have, of course, a nasty habit of becoming disconnected!
Monday, November 24, 2014
Tuesday, November 18, 2014
Unfortunately, the negotiations between Greece and its international creditors have become deadlocked over a final round of measures required to release the last tranche of the country’s bailout.
According to Bloomberg the Greek government is resisting pressure from the troika for additional budget savings in 2015 of about 2.5BN euros.
Seemingly Greece now risks missing the 8 December deadline to reach agreement on the steps required to unlock the aid and what comes after. Dutch Finance Minister Jeroen Dijsselbloem said:
“It’s crucial that Greek authorities work with the troika to complete the current review and the program so we have a clear cut between the finishing of the program and any instruments that will follow up on that from Jan. 1.”As I have noted many time before, Greece's best path to economic stability and growth lies outwith the Eurozone.
Monday, November 17, 2014
Apparently this has "shocked" analysts and those who claim to be experts in economics.
Japan introduced a sales tax earlier this year which, quite obviously, would have (and indeed did) negatively impact consumer spending.
For reasons that only Prime Minister Shinzo Abe can know, the sales tax hikes (another is planned) were meant to bring the economy out of its decades long slump.
Quite why increases in consumer taxes were meant to stimulate the economy is beyond me, even more so why "experts" didn't see the increase in taxes as a threat to any form of nascent economic recovery!
Friday, November 14, 2014
Thursday, November 13, 2014
"'We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them.' [That] was their basic attitude, all of them."The Greeks knew this at the time, and it was indeed self evident to anyone who took more than a passing interest in the death throws of the Eurozone.
However, seeing it in black and white four and half years on is still shocking!
Wednesday, November 12, 2014
For good measure The Bank of England dismissed its chief currencies dealer following an investigation, for "breaching internal policies".
As per the Telegraph:
Financial Conduct Authority
• Citibank: £225,575,000
• HSBC: £216,363,000
• JPMorgan: £222,166,000
• RBS: £217,000,000
• UBS: £233,814,000
Commodities and Futures Trading Commission
• Citibank: $310m
• JPMorgan: $310m
• RBS: $290m
• UBS: $290m
• HSBC: $275m
• UBS: 134m Swiss francs
Well done lads, you are a "credit" to the "profession"!
In case anyone is wondering why Barclays isn't mentioned, it is still being investigated.
Governor says more likely than not that he will have to write letter to Chancellor in coming months explaining why inflation too low— Robert Peston (@Peston) November 12, 2014
Thus underscoring what I have said many times before on this site, namely that interest rates will not go up anytime soon!
Tuesday, November 11, 2014
As per Bloomberg:
"Jean-Claude Juncker, the new president of the European Commission, was always a bad choice for the job, foisted on the bloc's 28 national governments by a European Parliament eager to expand its powers. It's becoming clear now just how poor a decision that appointment was.Juncker is but a symptom, not the cause of the stench that emanates from the EU. Until the EU, its systems, commissioners and MEPs are radically overhauled/cut out, the EU will never recover.
Juncker was the prime minister of Luxembourg, a tiny nation with a population 1/17th the size of London's, for almost two decades. In that time, he oversaw the growth of a financial industry that became a tax center for at least 340 major global companies, not to mention investment funds with almost 3 trillion euros ($3.7 trillion) in net assets -- second only to the U.S.
Partly as a result of the Swiss-style bank secrecy rules and government-blessed tax avoidance schemes that helped draw so much capital, the people of Luxembourg have become the world's richest after Qatar. The tax arrangements, described in leaked documents provided by the International Consortium of Investigative Journalists, allegedly enabled multinationals, from Apple to Deutsche Bank, to reduce their tax liabilities on profits earned in other countries: The effective Luxembourg tax rates that resulted were as little as 0.25 percent. The countries where the money was made received nothing.
It's telling that these arrangements have long been shrouded in secrecy. (Only last month did Luxembourg's government drop its opposition to new EU rules on banking transparency.) Juncker, you could say, made his country rich by picking the pockets of other countries, including those of the European Union he is now mandated to serve.
The commission was already conducting an investigation of Luxembourg's tax arrangements. Juncker says he won't interfere -- but he won't recuse himself, either. Indeed, his spokesman says he is "serene" in the face of the revelations. He shouldn't be. At this point, he could best serve the European project by resigning.
Juncker's position as the head of the body investigating the tax practices he oversaw as prime minister is a clear conflict of interest. It's possible the commission will find nothing improper about Luxembourg's tax-avoidance paradise: The EU allows member governments wide latitude in taxing companies, so long as they don't favor some over others. But with Juncker in charge of the commission, any such exoneration will fail to command public confidence.
Just now, the importance of restoring trust in the EU would be hard to overstate. The union is struggling to emerge from the financial crisis and is increasingly seen as elitist, meddling and incapable of producing either fairness or growth. It cannot help this effort to have it overseen by a man who spent his career as a quintessential backroom dealer while building and running an international tax haven at other European countries' expense.
Granted, most of this was known -- or should have been -- before the appointment was made, and the European Parliament is much at fault for insisting on Juncker's appointment in the first place. But the tax revelations have put the issues before the public in a way that tests the EU's credibility afresh. Juncker has done nothing illegal and is in no immediate danger of being removed. Even so, the EU would be best served if he stepped down. "
Monday, November 10, 2014
He is quoted by the Telegraph:
"Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved without recourse to public subsidy and without disruption to the wider financial system."The proposals are set to be agreed on by the G20 next year, and must be implement by banks by 2019.
This is all very well and dandy. However, it will mean higher costs for the customers of the banks; as the creditors will expect a greater return for the risks that they bare.
Wednesday, November 05, 2014
This means that the EU's accounts have been qualified 19 years running.
Any business that produced such a dismal set of audit results would be torn to shreds by its shareholders, and subjected to a thorough fraud investigation. Unfortunately the EU is, by its own reckoning, above the law and hence will not change its ways unless forced to.
Given the stench of corruption that emanates from Brussels, it is surprising that its MEPs and Commissioners aren't wearing gas masks!
Tuesday, November 04, 2014
He has, however, modified this now saying that he won't pay "all" of it.
Now comes the tricky question of interest payments (of £2M per week), if the bill is not steeled in full by the 1 December deadline.
Cue behind the scenes wrangling and negotiations.
The reality will be that Britain will pay the bill, probably late in order not to upset the Rochester by election, but not the interest.
Monday, November 03, 2014
Unsurprisingly, the EU has just woken up to the fact that it is "highly unlikely" that Greece will be able to end its bailout programme without some new form of assistance. In other words Greece will need another bailout in order to meet the conditions of existing bailouts!
A senior EU official is quoted by Reuters:
"A completely clean exit is highly unlikely.In other words the EU doesn't know yet what form the new bailout will take.
We will have to explore what other options there are. Whatever options we may be adopting, it will be a contractual relationship between the euro area institutions and the Greek authorities."
They will have to hurry, the current bailout package expires 31 December this year.
Whatever the deal, if one is forthcoming, it will be in effect throwing good money after bad.
It is "ironic" that the EU busts a gut to try to keep Greece (a financial basket case) onboard, yet barely flinches at the very real prospect of Britain (a strong contributing economy) leaving!
Thursday, October 30, 2014
By way of compensation the building society is offering savers the chance to win a £50,000 tax-free cash prize, each time they deposit £10,000 into a "Windfall bond" (which will earn 0.5%).
Wednesday, October 29, 2014
The Telegraph notes that a source close to the probe said that Tesco had booked supplier contributions that were conditional on hitting sales targets that it was not going to reach.
They claimed that a “small group” of employees, realising these sales targets would not be hit, struck deals with suppliers to still make these payments by offering benefits in the next financial period. These benefits were then kept secret.
That would count as fraud both within Tesco and the supplier that agreed to the arrangement.
Tuesday, October 28, 2014
Monday, October 27, 2014
He is quoted by the Telegraph:
“Starting to raise the Bank rate now makes it more likely that the increase required over coming years to deliver our inflation target can be kept gradual and limited.”Whilst this is all very well in theory, in the sterile world of an economist's textbook, the reality is somewhat different:
- There is no build up of inflationary pressure
- People are saddled with debts that they can ill afford
- Our economy is consumer driven, people with debts need to be encouraged to spend/borrow more
- There is a general election in May 2015, there is no way a rise in interest rates will occur before then!
All in all McCafferty's call for a rise in rates is deluded.
Friday, October 24, 2014
This boost the UK economy has, unsurprisingly, sent the EU round with a begging bowl for more money. The BBC reports that the EU is demanding £1.7BN extra.
How "ironic" that this demand has been issued at the self same time that Cameron is trying to stand up for Britain. This is a gift for UKIP, and one that the EU may well regret as it will most likely speed up our exit.
Thursday, October 23, 2014
In fact the £250M black hole was £263M!
Monday, October 20, 2014
Friday, October 17, 2014
Contrary to the perceived "wisdom" I have repeatedly stated that rates will not rise anytime soon, least of all before next May's election.
I am amused to see that Andy Haldane, who sits on the Monetary Policy Committee, also now agrees with my view.
He cites global growth fears, rising geo-political risks and a "weak pipeline" of inflationary pressures as the rational for the Bank of England keeping rates lower for longer.
Thursday, October 16, 2014
Other markets around the world are also falling, indeed at one point the Dow Jones fell by 3% overnight.
For why are the market falling?
Fear, greed, profit taking mixed with (according to the Telegraph) the following:
- fears over the stability of the Greek government and its bail-out plans. Hardly new news, and one that would have been factored into the markets many months ago.
- the ongoing eurozone crisis
Wednesday, October 15, 2014
Tesco is quoted in The Guardian:
“We have asked three employees to step aside to facilitate the investigation into the potential overstatement of profits in UK food for the first half of the year.”Although the staff are not named, they are understood to be category directors in charge of procuring whole sections of goods for Tesco stores. As per Sky News they are Dan Jago, Tesco’s UK and group wine director, Sean McCurley, director of convenience foods, and William Linnane, director of impulse purchases.
Their Twitter and LinkedIn accounts were deactivated on Tuesday.
Earlier this week Tesco’s company secretary, Jonathan Lloyd, said he would leave next March after serving his notice period. Audit committee chairman and non-executive director Ken Hanna is also expected to stand down when his six-year term ends later this year.
This is certainly one way to revamp the board. However, whilst these staff are suspended one might be forgiven for asking who exactly is/are covering their roles?
Tuesday, October 14, 2014
In an attempt to ameliorate vexed Nectar card holders, Sainsbury's claim that there will be bonus points schemes enabling people to earn more points in other ways.
Despite the PR hype, which included the much overused word "exciting", this is of course a means of Sainsbury's saving money; as it clearly would not do this otherwise.
Friday, October 10, 2014
It seems that there is a "serious flaw" in the national accounts that within 12 months will leave the Government short of money to pay pensioners.
Michael Johnson, an academic at the think tank, claimed in the Telegraph that senior Westminster sources had privately admitted that state pension funding was in a perilous state, having viewed his research.
Millions of taxpayers under the age of 45 faced steep tax increases and would have to wait longer to collect a state retirement income, he claimed, while the under-35s should prepare for the state pension to be scrapped.
"It doesn't matter which government is elected next year, the state pension age will have to go up much faster and sooner than anyone expects to cover the funding deficit.
For Generation Y, aged between 25 and 34, the message from the Government ought to be that the state pension is not viable full stop. But, of course, no politician can say this publicly."
Mr Johnson said the amount of money in the National Insurance Fund was rapidly running out, as too little was flowing in.
As noted, the state pension scheme is nothing more than a Ponzi Scheme!
Wednesday, October 08, 2014
As such it should come as no surprise at all to learn that the war (that we now appear to be fighting) against ISIS, and the mess in Ukraine has boosted defence shares in the USA.
Bloomberg reports that Lockheed Martin and other U.S. defence companies are trading at record prices, as shareholders reap rewards from escalating military conflicts around the world. Cynics might wonder if it is in the interests of the military/industrial complex to push for conflict.
Therefore, despite the fact that many people are dying and are going to die, some people somewhere are doing very nicely out if this!
I dare say Ebola is making money for those in the relevant pharmaceutical and protective clothing industries as well.
Let us trust that those who are doing well out of this live long enough to enjoy the spoils of war, and never have the misfortune to be killed in a terrorist atrocity or via an Ebola outbreak.
Tuesday, October 07, 2014
Should that action not take place before the investigation is complete?
Monday, October 06, 2014
A competition will be held to decide what image to put on the "tails" side of the coin.
Suffice to say, the introduction will give rise to costs eg machines that accept coins will have to be altered.
Saturday, October 04, 2014
Thursday, October 02, 2014
Unsurprisingly, Wonga now intends to increase checks on potential debtors to make sure that they can pay back the money borrowed.
Andy Haste, who became executive chairman in the summer, is quoted by the Telegraph:
"During my review, it became clear to me that this has unfortunately not always been the case. I agreed with the concerns expressed by the FCA and as a consequence of our discussions we have committed to taking these actions.Wonga is aiming to transform itself into a respectable financial company. This is but one step forward in the long process, another in my view will be to change its name to something less "streetwise".
It’s clear to me that the need for change at Wonga is real and urgent. Our regulator is determined to improve standards in consumer credit and I share that determination. There is much to do in order to make Wonga a sustainable and accepted business, and today’s announcement is a significant step forward in that process.”
Wednesday, October 01, 2014
Additionally, the Serious Fraud Office has said it is also prepared to intervene if necessary.
Tesco is quoted by the Telegraph:
"Tesco will continue to co-operate fully with the FCA and other relevant authorities considering this matter."
Tuesday, September 30, 2014
The figures contain £19M of "remediation" costs, relating to systems issues and growing its overseas business. The results are chronologically before Wonga's £2.6M fine for sending thousands of letters to customers in arrears from fictional law companies.
Andy Haste, chairman, is quoted by the Telegraph:
"Wonga has the ability to be great once again.This will be an uphill struggle, as the FCA has proposed a.o. capping the fees and rates charged on payday loans at 0.8% a day.
We need to repair the reputation, regain trust and get an accepted seat at the table of financial services."
Monday, September 29, 2014
Seemingly the whistleblower alerted senior directors at Tesco in July of concerns but "failed to get traction".
Friday, September 26, 2014
He is quoted by the Telegraph:
“Relative to the recent past, the economic outlook is much improved.Rest assured, as I have noted many times before, there will be no increase in rates until after the general election in May 2015.
While there is always uncertainty about the future, you can expect interest rates to begin to increase.”
Thursday, September 25, 2014
"Given that the auditors warned about this in May, does this mean that the previous year's profits were overstated?"It seems that I am not the only one who thinks this. The Telegraph reports that the Financial Reporting Council is “monitoring the situation” and could force Tesco to restate past accounts.
To rub salt into the wounds, it seems that Tesco have been "winging it" without a Finance Director since April; as its outgoing finance director Laurie McIlwee had “has not been involved or had any input to any financial matters” since he resigned on April 4.
This appears to be but the tip of a very large iceberg.
Wednesday, September 24, 2014
- property valuation "experts".
- lawyers and "specialists" involved in the inevitable disputes over valuations that will arise when the first mansion tax bills hit the doormats.
It is a tax that will fall at the first hurdle, and the proposal indicates how little Labour understands how the real world works.
Tuesday, September 23, 2014
In response, Ken Hanna, chairman of Tesco’s audit committee, wrote:
“The committee notes that commercial income was an area of focus for the external auditors based on their assessment of gross risks. It is the committee’s view that while commercial income is a significant income for the group and involves an element of judgement, management operates an appropriate control environment which minimises risks in this area. As a result, the committee does not consider that this is a significant issue for disclosure in its report.”Given that the auditors warned about this in May, does this mean that the previous year's profits were overstated?
The size of the fine is but small change for the bank, and does not inflict any pain on it whatsoever!
Monday, September 22, 2014
It has appointed Deloitte to independently investigate the issue.
Dave Lewis, CEO, is quoted by the BBC:
"We have uncovered a serious issue and responded accordingly."Tesco said the overstatement was "principally due to the accelerated recognition of commercial income and delayed accrual of costs". It also said some of the error was due to "in-year timing differences".
Unsurprisingly the markets are unimpressed, and shares in Tesco nosedived by 10% this morning.
Tuesday, September 16, 2014
As such they have, according to the Independent, been moving millions of banknotes to Scotland.
Aside from bank runs, and losses of corporate headquarters another cost (that has yet to be openly factored in/discussed) is the rebranding of Britain. The loss of the Union Jack will be more than just the flag flying above public buildings, but also its removal from all products currently sporting the image.
Add into that the duplication of bureaucracy and paperwork caused by a divorce of a 300 year old marriage, and you have some very large costs indeed.
I wonder if people really have woken up to the costs of this divorce?
Monday, September 15, 2014
Vodafone also recently terminated its contract with the firm, as had O2 some months ago.
Phones 4u employs 5,596 staff across 550 stores in the UK. The company has a turnover of £1BN and made a profit of over £100M.
Sadly, even though the business in itself is successful, without network operators it cannot exist.
Why have the network operators pulled the plug?
Money, they are facing reduced profits as result of caps on roaming charges etc; as such they are seeking to eliminate the middle man.
“I believe they really acted very, very ruthlessly. I get the feeling it came as a shock to the whole organisation of Phones 4u and potentially gave them no time to try and find a solution.
Whilst Mr Caudwell may well be right in his sentiments about business having a "bit of a heart", I wonder if he applied those sentiments 100% when he sold Phones 4u?I feel desperately worried for the future of Phones 4u. It’s in a really, really grim place.As far I can see it’s a well operated business that in a fair world has every right to exist. But we don’t live in a fair world, we live in a world where you make what you can for yourself and it’s a bit dog eat dog. I think that’s what’s happening here.
There’s a lot of ruthlessness being applied and if the public actually felt strongly enough they know what they could do, they could vote with their feet and move their business to other networks.
I don’t believe it can be rescued without one of the networks coming back to the table. Unless the government steps in we’ll be witnessing what was a phenomenal business destroyed by very ruthless behaviour.
It seems a shame that a business I spent 20 years of my life growing looks like it could come to such a sticky end.
I fully respect Vodafone’s right to act whichever way they want to for their own best commercial interests, which is fully in line with free enterprise and trying to maximise their shareholder value.
But I don’t think I could have ever behaved like that in Vodafone’s place. Business should have a bit of a heart. It isn’t just the bottom line at all costs.”
Friday, September 12, 2014
Royal Bank of Scotland, Lloyds Banking Group, TSB, Clydesdale, Tesco Bank and Aegon will all leave Scotland if it votes for independence.
The economic costs of such a move cannot be dismissed by Salmond as merely the "removal of a brass plaque". The fact that Salmond does not want to discuss this issue indicates that he has not factored in the costs, or does not want to admit that he has factored in the costs of independence.
Don't do it Scotland, you will regret it!
Thursday, September 11, 2014
With a week to go until the vote, markets are reacting to the daily poll results (they rise when "No" leads, and fall when "Yes" is in the ascendancy). As I have noted before traders are doing very nicely out of the politically induced volatility, let us trust that none of them have foresight of the polls before they are published!
Tuesday, September 09, 2014
Petra said that it expected the diamond (which has no measurable nitrogen impurities) will be sold in the second quarter of its current fiscal year ending June 30 2015.
Monday, September 08, 2014
Kit Juckes, head of foreign exchange research at Societe Generale, said:
“If the ‘Yes’ vote wins, I wouldn’t be surprised to see a 3pc to 5pc fall in sterling.”So what?
A fall in the value of Sterling will be good for exports, and good for England (in the event Scotland leaves the Union).
That being said, there are ten days left before the poll; during this time the FX traders will be making some serious money playing around with the value of Sterling, as newspaper headlines become ever more shrill wrt "saving the Union".
Traders love volatility!
Friday, September 05, 2014
Barclays is launching a finger scanner for corporate clients, as it steps up use of biometric recognition technology to combat banking fraud.
Barclays has teamed up with Hitachi to develop a biometric reader that scans a finger and identifies unique vein patterns to access accounts, instead of using a password or PIN.
Ashok Vaswani, chief executive of Barclays personal and corporate banking, is quoted by Reuters:
"Biometrics is the way to go in the future. We have no doubt about that, we are committed to it.Let us trust that the criminals don't resort to chopping people's fingers off in order to try to "breach the dam"!
You can't let these guys create a breach in the dam. You've got to constantly stay ahead of the game."
Thursday, September 04, 2014
As I have noted many times before money is made out of volatility, never assume that momentum (in whatever direction) is the new norm.
Wednesday, September 03, 2014
However, even by ONS standards their latest revision of figures takes the biscuit.
The ONS has revised upwards the GDP figures for 2012 (yes, 2012!) by quite a significant margin.
ONS revision: "By the end of 2012 economy was -1.7% below its pre-recession peak compared to the -4.0% previously thought".
— Paul Waugh (@paulwaugh) September 3, 2014
This again shows that for governments and businesses to rely in any way on the statistics provided by the ONS is foolhardy indeed, and will inevitably lead to costly errors of policy and strategy.
Tuesday, September 02, 2014
Sadly there is now another example of greed and stupidity that is coming to light.
According to the Telegraph middle-aged home owners are being denied cheaper mortgage deals because lenders claim that customers would be unable to afford the lower repayments after they retire. As a result, borrowers in their 40s and 50s are being trapped in loans with higher interest rates, leaving them on course for unnecessarily large bills in old age.
Now that's just stupid!
It also seems that lenders are incorrectly applying new affordability criteria, which are designed for new borrowers.
Not only are the financial institutions stupid, they are greedy and incompetent as well!
Monday, September 01, 2014
US traders borrowed $460bn from banks and financial institutions to back shares, and once cash and credit balances held in margin accounts of $278bn is subtracted this left net margin debt of $182bn in July
Traders are now more exposed to a fall in share prices than at the height of the dot-com bubble at the turn of the century, and just before the financial crisis during the 2007 peak.
The Telegraph's article goes on to almost push for a collapse in the market. However, even if the media gets its way (disasters do make great headlines), the world will survive and move on. Markets have crashed many times before, and they will continue to do so.
Money is made from volatility.
Friday, August 29, 2014
Emulating UK financial institutions that offer stuffed toys/meerkats etc as gimmicks, if you buy their products, Sberbank a Russian bank is giving free cats to people who take out a mortgage.
Sberbank is offering customers a choice of 10 cats, which will be delivered to their home.
However, homeowners are only allowed to keep the cat for two hours. They must also sign an agreement promising they will not harm the cat.
Thursday, August 28, 2014
"Unfortunately, I think it could come on a crash similar to what happened in 2007.
You can see that the entire bull market trend over the past five years has started to reverse.
When you see that kind of gyration around the trend, typically it suggests you're going to see some severe volatility. As scary as it is, I think that we could see possibly a 50% or 60% correction - an equal and opposite reaction to all these unusual policy moves."Maybe so, maybe not.
However, markets go up and markets go down. The world has survived previous crashes and will do so again, because the only way that people make money out of markets is for there to be volatility (both upwards and downwards).
Wednesday, August 27, 2014
As yet though, she is insisting that she won't resign as head of the IMF.
The FCA said that the fine for RBS and the NatWest reflected "serious failings" in their advised mortgage sales business. The firms failed to ensure that advice given to customers was suitable, according to the FCA. Two reviews of sales from 2012 found that in over half the cases the suitability of the advice was not clear from the file or call recording.
Customers were not advised properly over the affordability of mortgages, or the appropriate term of products being offered. Others were given poor advice when looking to consolidate their debts.
“Taking out a mortgage is one of the most important financial decisions we can make. Poor advice could cost someone their home so it’s vital that the advice process is fit for purpose.The FSA initially drew the firms’ attention to issues in their mortgage advice process in November 2011. However, no effective attempts to remedy the problems were made until the end of September 2012.
Both firms failed to ensure that their customers were getting the best advice for them.
We made our concerns clear to the firms in November 2011 but it was almost a year later before the firms started to take proper steps to put things right.
Where we raise concerns with firms we expect them to take effective action to resolve them without delay. This simply failed to happen in this case.”
Tuesday, August 26, 2014
Thus the media is doing its best to pump up the markets, by pushing the tired old line that the ECB will do something radical (eg cut interest rates and go for QE).
This is of course hyperbole, as the ECB (in the shape of Mario Draghi) is incapable of doing anything radical. Instead the eurozone will sink ever further into the quagmire of its own economic and political structural failings.
Wednesday, August 13, 2014
Unemployment claimant count has fallen faster in 12 months to July than any 12 months since 1973.— David Gauke (@DavidGauke) August 13, 2014
Pay very weak - down 0.2% latest three months on year earlier - as expected. Test will be when bonus/50p tax distortion drops out.— David Smith (@dsmitheconomics) August 13, 2014
More people are working, but their incomes are being squeezed. The "good times" are but a faded memory!
Tuesday, August 12, 2014
The Council of Mortgage Lenders (CML) recorded the highest number of loans (28,600) lent to first time buyers this June, since December 2007. This is an increase of 7.1% since May.
At some stage the market will cool and rates will rise, the issue will then be can these borrowers keep up with their mortgage payments and are they in a position of negative equity?
Monday, August 11, 2014
This research will of course further fuel the "panic" selling, thus providing estate agents with a good fee income for the coming months.
Friday, August 08, 2014
As per Positions and Promotions, the official PMI, which samples 3,000 nationwide enterprises of various sizes, reached its highest level in more than two years at 51.7, up from 51 in June. The fifth consecutive month of recovery, was stronger than the market consensus forecast of 51.4.
The HSBC PMI, which samples 420 small and medium enterprises, showed similarly positive results reaching 51.7 for July. It indicates the strongest rate of improvement for China's manufacturing sector in a year and a half.
Wednesday, August 06, 2014
Osborne has instructed the Treasury to assess how the UK could become a leading global centre for Bitcoin and other virtual currencies.
If it moves tax it, if it threatens other means of revenue generation regulate it!
Tuesday, August 05, 2014
He is quoted by the Telegraph:
“Unwarranted risk aversion threatens to restrict access to the formal financial system to many who could benefit from it.
There’s a creeping concern that staff are concerned about the penalties for getting things wrong and building risk aversion… getting to a state where there’s a zero risk tolerance.”
As is the nature of any post binge clean up, the pendulum often swings too far the other way.
However, Flint may care to remember that these regulations (whether they are excessive or not) came into being because of the activities and risk appetite of the banks and their staff.
Monday, August 04, 2014
Justin Modray, of Candid Financial Advice, is quoted by the Telegraph:
“I think many policyholders will be very surprised to be told, come April, that they can’t have their money and there will be a big backlash.”As with all financial schemes, the devil is in the detail!
Friday, August 01, 2014
People are becoming very nervous about the knock on effects of the sanctions on Russia, and fears that interest rates may start to rise in the US.
That being said, markets go up and markets go down. There will always be another bubble then another crisis to prick that bubble.
Wednesday, July 30, 2014
The Bank of England proposes that UK bankers guilty of misconduct could have their bonuses clawed back up to seven years from the time these were awarded, and could face hefty jail sentences in some cases.
The BBA won't like this at all!
Tuesday, July 29, 2014
"As countless scandals demonstrate, virtue is distinctly absent from our banking institutions.An extract from the oath says:
Britain's bankers lack a sense of ethos and the institutions they work for lack a clearly defined social purpose."
"I will do my utmost to behave in a manner that prioritises the needs of customers.All very well and nice, but to whom do the bankers swear this oath?
It is my first duty to provide an exemplary quality of service to my customers and to exhibit a duty of care above and beyond what is required by law....
..I will confront profligacy and impropriety wherever I encounter it, for the conduct of bankers can have dramatic consequence for society."
BBA executive director for financial policy and operations, Paul Chisnall, said:
"Restoring trust and confidence is the banking industry's number one priority.An oath of course would mean absolutely nothing, and would entail a very small administrative burden. Hence the fact that the BBA rather likes the idea!
But meaningful cultural change in an industry as complex and diverse as banking takes time....
..very well could be part of the answer".
Friday, July 25, 2014
Compared with the second quarter of last year, growth was 3.1%, the fastest pace since the end of 2007.
Total economic output was 0.2% higher than in the first quarter of 2008, its previous peak.
As Robert Peston wisely observes:
So the British economy is at last a teeny weeny bit bigger than it was just over six years ago. But you probably don't feel richer
— Robert Peston (@Peston) July 25, 2014
Thursday, July 24, 2014
He spoke at a business conference in Glasgow and expressed concerns about a housing bubble developing. Yet, in the same speech, he also noted that the Bank was not worried about the house prices themselves but was worried about household debt.
He noted that interest rates will be "materially lower" in the medium term than they have been historically.
When will rates rise?
Carney is quoted by the Telegraph:
“The clearest indication of when rates will rise is when they rise.”I personally do not see them rising before next May's general election.
Wednesday, July 23, 2014
Aside from making money out of the rising property prices, they are also guaranteed to make money from the declining rouble (as the sterling value of their UK properties appreciate against the rouble) as sanctions are ratcheted up on mother Russia.
A nice little earner!
Tyrie is quoted by the Telegraph:
“If this is how RBS deals with a parliamentary Committee, how much can customers and regulators rely on it to be straightforward with them?
I will be writing to the Chairman of RBS about this, and the Committee will report on it after the summer.”
“Following the Committee’s decision to write to Sir Andrew Large for clarification, RBS has now offered the Committee what it euphemistically describes as ‘additional comments’.The financial services industry in the UK is quite simply a crock of shite!
In fact, they have done a belated U-turn. It’s not as if the facts have changed.
So it now appears that RBS has been wilfully obtuse with the Committee.”
Tuesday, July 22, 2014
The Telegraph reports that so far more than 25 traders working at a number of the world’s biggest banks have been fired or suspended while regulators around the world continue their investigations.
The forex scandal is likely to be as damaging to the "reputations" of banks as the Libor scandal.
The lesson to learn from this, and all the other scandals, is that all markets are rigged in favour of the "house".
Monday, July 21, 2014
Friday, July 18, 2014
The CMA said switching between banks remains low, meaning “very limited” gains have been made by banks with the highest levels of customer satisfaction. It said this was “not what would normally be expected in well-functioning competitive markets”.
CMA chief executive Alex Chisholm is quoted by the Telegraph:
"Our studies have found that, despite some positive developments, significant competition concerns remain which mean that customers may not be getting consistently good service and value from their banks.A full investigation, if it occurs, would take about 18 months.
Our provisional view is that a full market investigation by an independent expert CMA group is necessary to look at this market in detail and identify appropriate measures if competition concerns are found.
However we very much welcome views, which we will carefully consider, before taking a final decision."
Doubtless the vested interests will ensure that nothing concrete or radical happens if an inquiry ever gets off the ground.
Thursday, July 17, 2014
The letters, despite being headed with names that make them look like they are from separate law firms, were actually from the banks' in-house legal teams.
In his response to Mr Tyrie, Lloyds chief executive Antonio Horta-Osorio said the bank had used the name of SCM Solicitors, a business purportedly based in Hove, East Sussex, because customers in financial difficulty did not respond to letters from the bank itself.
Mr Tyrie is somehwat less than impressed and, according to the Telegraph, is of the view that the letters were "calculated to mislead".
Lloyds claims that letters were "intended to encourage customers to speak with us".
RBS, Nationwide and HSBC also used the names of law firms when sending correspondence from their own departments.
Cynics have noted that Wonga were not fined for their letters because the mainstream banks were all playing the same dishonest game.
Britain's financial services industry is pox ridden!
Wednesday, July 16, 2014
The jobless rate for that period stood at 6.5%, close to the 6.4% level of Q4 2008.
However, during the same period of this year, average pay rose by 0.3% whilst CPI rose by 1.5%.
As ever with statistics from the ONS one has to be wary of them:
Friday, July 11, 2014
One year on, and the CoE has finally distanced itself from Wonga and dispensed with the investment.
Pricing a share issue is not an exact science, if the price is too high then all of the shares may not be sold (hence the need for underwriting) if the shares are sold too cheaply then there are accusations that a greater profit could have been made.
In this case a loss of £1BN on a sale of £3.3BN is materially significant. Also, worthy of note, is the fact that (as per the Telegraph) the asset management arm of Lazard (also a specially selected investor in the float) made £8M profit by selling off its stake immediately.
The Government sold 60% of Royal Mail at 330p in October. The shares soared by 38% on the first day of trading and rose as high as 615p but have since fallen back. Yesterday the shares closed at 474p.
Thursday, July 10, 2014
However, according to the Martin Lewis (writing in the Telegraph) up to five million people may be missing out on the compensation because they confuse the issue with PPI and throw away a legitimate ‘‘fill this in to get your money back’’ form for junk mail.
Martin Lewis estimates that £900 million remains to be claimed, with a deadline of August 30 looming on the horizon.
I wonder if there is any financial product in this country that hasn't been mis-sold?
Tuesday, July 08, 2014
The Energy Information Administration (EIA) is quoted in the Telegraph:
“As a result of the significant increases in taxes, the UK Continental Shelf [UKCS] projects have become even less competitive.
Increases in operating costs coupled with higher taxes have resulted in decreased investment in both brownfields and new exploration. Even without the increased taxes, operating costs in the UKCS were prohibitively high, exacerbated by the high decommissioning costs of old facilities.”'Twas ever thus, governments short of cash rarely cut expenditure; instead they increase taxes.
Monday, July 07, 2014
He is quoted in the Telegraph:
“The way we bank now is far easier and faster.”The reality is that pushing customers towards online banking only will benefit the banks' bottom lines. However, when something goes wrong or a customer actually needs to speak to a human being, Browne's vision of the future is that we will be forced to use hopeless and hapless call centres to resolve our problems.
Additionally, the loss of the personal relationship with a bank manager means that customers seeking loans and mortgages are left in the hands of faceless credit ratings agencies and the banks' computers and risk algorithms for the outcome of the loan decision.
In short, the customer is screwed!
Monday, June 30, 2014
“Coffin corner” is the point at which a passenger jet is flying at maximum altitude with engines at full throttle. This is when even the smallest mistake can lead to disaster, and it has (so the Telegraph claims) startling relevance for today’s stock markets.
The people piloting the global economy today freely admit they are in completely uncharted territory and largely responding to each event as and when it comes.
I have news for the Telegraph, that is exactly how markets work.
Markets are based on fear, greed and the herd mentality; that is why bubbles form and bubbles burst!
Friday, June 27, 2014
Anyone who attempts to predict the future wrt economics or politics is either remarkably foolish or remarkably well informed.
Time will tell!
Thursday, June 26, 2014
“The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit.
Barclays grew its dark pool by telling investors they were diving into safe waters. Barclays’ dark pool was full of predators – there at Barclays’ invitation.”
The attorney general's office quoted one Barclays employee as saying:
“I had always liked the idea that we were being transparent, but happy to take liberties if we can all agree.”Another allegedly said:
"If we can help ourselves we should; it's in our control."The attorney general's office claimed that Barclays "has never prohibited any trader from participating in its dark pool, regardless of how predatory its activity was determined to be" and gave "safe" ratings to traders that were found to be toxic.
"Barclays operates its dark pool to favour high-frequency traders and has actively sought to attract them by giving them systematic advantages over others trading in the pool."Barclays said in a statement:
“We take these allegations very seriously. Barclays has been cooperating with the New York Attorney General and the SEC and has been examining this matter internally. The integrity of the markets is a top priority of Barclays.”
Wednesday, June 25, 2014
Data from the British Banking Association showed that mortgage lending grew by £1.2BN in May, down from a £1.3BN in April.
Mortgage approvals totalled 41,757 in May down from 41,834 in April.
The BBA's chief economist Richard Woolhouse is quoted by the Telegraph:
"Our figures indicate that the heat appears to be coming out of the housing market.Maybe so. However, a reduction in approvals of 77 hardly constitutes a collapse!
These are the first mortgage approval figures we have seen since the introduction of the Mortgage Market Review, so it is significant they have fallen for the fourth row in a month."
Let us see more data in the coming months before concluding that the market is cooling.
Tuesday, June 24, 2014
As per Mark Carney, Governor of The Bank of England, at today's Treasury Select Committee:
"The exact timing of that [increases in interest rates] will be driven by the data. But the most important aspect of the guidance that we're giving is that our view is that the increases in rates over the forecast horizon, in our best estimation, will be limited and gradual."'Nuff said!
Monday, June 23, 2014
"It now seems to me much more likely that a normalisation of monetary policy starting at some point in my remaining year on the MPC will become appropriate."Does that mean rates will rise in the next month or so?
No, rates will not rise yet.
Next year's general election needs to be out of the way first, before the government risks upsetting the voters. More to the point Professor Miles acknowledges that there is slack in the economy and as such "the stimulus given by very low interest rates is not something that has to be removed right now".
The media of course have missed the above two points and are screaming that interest rates will be raised in the very near future.
Monday, May 12, 2014
This of course may be all very well if:
1 There were not a general elction in the offing, and
2 The price rises were not mainly be fuelled by London prices.
As such the Bank of England will defer any rate rise until after the election.
Thursday, May 08, 2014
The redundancies are aimed at cutting costs and, more importantly, reducing the proportion of risk assets used by the investment bank.
Wednesday, May 07, 2014
Lord Myners has also proposed the creation of a new 50-strong National Membership Committee to provide oversight of the top body, and the extension of voting rights to all individual members of the Co-op:
"I would say that the group board and many of the regional boards are still stuck in denial over this near ruinous failure of governance, whereas the vast majority of ordinary members feel justified anger. Radical decisions on governance structure need to be taken very soon - and with resolution - if the Co-op, as my mother knew it, is to be saved."However, in order for his report to have some beneficial effect for the Co-op and its members, his recommendations need to be approved by a vote of the 600 "elected members".
The question is, will the Co-op turkeys vote for Christmas?