Calamity Chain(saw)

Like investors, banks so often make the mistake of under or overreacting to situations. In this case, the growing consensus at the bank is that this has been a level of cuts too far.

Suddenly all manner of tasks, from day to day tedium to vital projects, are facing significant delays. Trading, Operations and Support teams were left scrambling to try and fill the holes left by 'resources moving on', which is the amusingly non-descript corporate phrase being used to describe the practice of mercilessly firing bright, hard working employees who mostly have done nothing to deserve it. The most bizarre part is that countless teams are finding experienced experts who survived being randomly moved onto other teams that are in worse trouble. To my surprise the firm is managing to now also utilise fewer resources less efficiently.

Perhaps it's me, but the whole thing indicates a pea-brain level of decision making at the top. Presumably there is an inverse relationship between salary size and common sense.

As such my life has suddenly timewarped and gone from manageable back to an earlier time in my career, with far too much hands-on crap. I was busy working long hours before, but suddenly the lunchtime stroll I was regularly taking in the City to somewhere where I write this blog has become a luxury. I spent 6hrs solidly in meetings from 1pm yesterday for example. So much for work life balance anymore - our masters at the top appear to naively have expected us to simply deliver as much as before (perhaps because that was mostly possible in the previous round).

It is perhaps telling that Asset Management have already been given tacit approval to start hiring, which says everything you need to know about how close we are to reaching the bottom. I think we are there, but that is dependent on when the credit markets start to thaw.

On that subject, it is good to see that the UK and US governments are pushing on with policies to pump much-needed funds into the economy. I don't subscribe to the public hysteria about letting the banks rot, but that is hardly going to surprise anybody. What some people do not appreciate is that governments are not spending our money - they spend that and more before we pay taxes each year - but that due to circumstances, they are simply increasing a number in the computers at the Bank of England and Fed.

Quantatitive easing in this case is not really about printing money. In theory it will be about buying up assets that push money out to the credit markets and (in theory) encourage lending, and then selling those to the private sector once normality starts to return (paying off the money it has created). The issue is ensuring that the money is circulated rather than holed up. It is rather like if the government sent a £1000 cheque to everybody. Two years ago I would have been online to book a holiday within a minute, but today it is just as likely I might save that for the all-too-likely rainy day, thus making no actual improvement in the economic situation. Actually not in my case, I would just get on and invest it as I do most of my savings.

On that subject, GGP remains at historic lows in the 40 cent range right now. Indications are that asset sales are on the way, which should enable several loans to be paid off. There are currently fears circulating about GGP needing to dilute shares hugely through an issue to pay off additional debt next year - that is unfounded given that at these low levels the firm is worth a mere $100m, when its balance sheet indicates $3-4bn is more accurate. It would effectively hand the entire firm to a single creditor, which nobody would want. The creditor would want cash, not to inherit the mess GGP is in, and nor would it benefit significant shareholders currently negotiating such deals.

I am still optimistic that patience will see a resolution to the GGP refinancing impasse, and Chapter 11 remains a useful bargaining tool for the firm in securing fairer terms with its creditors. Having looked into this in more detail, I am starting to conclude that the UK needs to implement similar protection laws here, although hasten to add I am no expert so that is just an aside.

Finally, it was amusing to see Gordon Brown on the front page of the Metro on the way into work this morning. The caption read he was being greeted by congressmen, although as with most things relating to him, on closer inspection it was less impressive. Those eager, outstretched hands turned out to be teenage pages, who work for the senators there on secondments. Very impressive Gordon, I'm sure your vacuous speech will save the world (again) as well.