It is interesting how everything in life is cyclical. You're born a disgusting, wrinkly ball akin to the stomach parasite from Alien, unable to speak or wipe your own bottom - and if lucky you end up that way again by your late-80's.
On the subject of cycles, do we truly learn from mistakes? Perhaps on a generational level, but surely not beyond that, which is why so many of the problems we are seeing now have happened before. It is the same point raised in the book 'The Millionaire Next Door', which observes how the wealth acquired by self-made millionaires through frugality is usually lost within a couple of generations, as their offspring piss it all away pursuing a materialistic utopia.
Anyway my point was actually around the whole Bernard Madoff fraud, and the absolute certainty that it will happen again in the future. I don't care what politicians and others in the press state about controls to prevent it, that is simply not the case. Wherever there are naive and/or lazy investors, there will be largely unregulated, opaque funds promising fabulous returns that seem too good to be true
In one sense everything is legal until you are caught - something that Enron illustrated impressively - although not a position I agree with, despite notions of 'right' and 'wrong' being grounded solely in perspective.
So it was with some interest that I got some perspective when I chanced upon a CMBS securitization dealer from another bank over at a Corney & Barrow champagne reception last Friday. It was completely random, at a wedding drinks bash: not mine, and sadly and not corporate - the days of charging everything back are sadly not yet there again.
I was most surprised to find out the trader worked for RBS, who having notched up losses to rival Citibank, and really are a basket case in the world of banking these days. My first question to him of course, apart from the standard piss-take "what's it like to work in the public sector these days?", was what he was still doing there with a job?
He confirmed my suspicions by admitting to being the only one left of a team of 25 a year ago. An interesting illustration of another factor reducing the CMBS transactions taking place, given the headcount reductions to support the transactions. In effect though, he is minding the shop with respect to their existing CMBS portfolio - but did add he is still an originator.
Obviously I had to bring up the subject of General Growth, more to see if he knew anything about it and the potential impact of the SPE ruling. He knew enough for me to have some fun ripping his industry apart, as I reminded him what a joke the previous contracts and sales processes had been.
He did not disagree, but gave the inside perspective - namely that it was really for the clients to complete the due diligence as they were the ones impacted. That is fair enough, but as I reminded him that is not really a valid view given the $50bn loss RBS took last year - it might just be arguable that they were impacted as well. He also confirmed the rumours I have heard that the industry is busy co-ordinating a complete re-structuring of SPE's and associated contracts that will supersede what is currently on the market.
Hardly a surprise, but what that does suggest is that when we finally receive a ruling it will not have nearly the ramifications that some would suggest. There is otherwise little news on the GGP front besides some minor legal applications ahead of future hearings.
Good news for me is that the functional spec will (at last!) be finished by the weekend. It has taken me about 2.5mths due to work, and after drafting up a high level technical spec next, I could in theory get it built in the next couple of weeks. However I will be moving onto the biggest job of all next - populating the site content. Rather more important at this stage, and given the site will provide industry grade investment research papers to registered users (for free), that is going to take time to get ready. I will be covering everything from corporate finance to investment products, market psychology and all trading products on the market, whether investors have access to them or not.
The key to successful investing, particularly for those aspiring to reach high net worth status, is building strong foundations - and that goes beyond simply building knowledge. Either way this site is going to be a more intelligent alternative to the main investment tabloids.
Showing posts with label Bernie Madoff. Show all posts
Showing posts with label Bernie Madoff. Show all posts
Wednesday, July 1, 2009
Thursday, February 19, 2009
Could This Be It?
There seems to have been a subtle shift in the wind here at the bank. Go back a month, and there was naked fear in the air about imminent job cuts - in no small part fueled by stressed managers making unsubtle references to resource unavailability and performance limitations. And vicious rumour mongers like myself.
Yet there seems to have been a surprising turnaround in the last fortnight - at least here, I can't speak for other banks busy absorbing huge losses and laying off thousands. From what I can determine from various trusted sources, it seems the bank has postponed plans to lay off any more people. That in itself is significant - from top to bottom now, we have shed around about 22% of headcount which is certainly a lot.
The economy is cyclical (Gordon take note, a 10yr boom will not be followed by another one), and one effect of a particular sector going into downturn first is that the impact of this ripples outwards to the rest of the economy like a bomb exploding. I had many a bemused discussion in the last 18mths talking to very intelligent (home loving) bankers, who were coming out with ridiculous views that the London housing market was somehow "immune" from any downturn.
In this case, we in financial services have now weathered a 20 month storm since Bear Stearns' nationalisation first shook the financial world - the first significant job cuts coming from late 2007. It seems reasonable that we are therefore going to hit the bottom first too, and reach a period where things stop getting worse and headcount (and performance/earnings) stabilise. Timing is so difficult, but I am going to call us reaching that period across financial services in around 6-9mths, with us reaching the bottom of the markets in Q3 2009.
Otherwise on a work social last night, I took the opportunity to find out more details about the current talk amongst Prime Brokerage here, that we have inadvertently gotten ourselves caught up in this whole fiasco relating to yet another investment shark, Allen Stanford. Not directly of course, we would be no more likely to entrust our own funds to the financial equivalent of an East End used car salesman as we would have given a penny to Bernie Madoff.
No, the problem is that yet again Private Wealth Management have played the 'not my problem guv' card. Whereas before we had a commendable ban on any trading activity with Madoff's ponzi scheme, we seem to have let a number of our cricket-loving HNW's (high net worth individuals) go and place funds with him. As you can imagine, the internal impact has been the usual internal cover-up for now, so not much is being openly said but it is difficult to imagine we won't be openly mentioned in the press in connection to all this soon enough.
I wish I could say I was bothered, but previously market shocking stories are becoming a daily soap opera nowadays. Is it just me or is the collapse of the financial system absolutely hilarious?
Yet there seems to have been a surprising turnaround in the last fortnight - at least here, I can't speak for other banks busy absorbing huge losses and laying off thousands. From what I can determine from various trusted sources, it seems the bank has postponed plans to lay off any more people. That in itself is significant - from top to bottom now, we have shed around about 22% of headcount which is certainly a lot.
The economy is cyclical (Gordon take note, a 10yr boom will not be followed by another one), and one effect of a particular sector going into downturn first is that the impact of this ripples outwards to the rest of the economy like a bomb exploding. I had many a bemused discussion in the last 18mths talking to very intelligent (home loving) bankers, who were coming out with ridiculous views that the London housing market was somehow "immune" from any downturn.
In this case, we in financial services have now weathered a 20 month storm since Bear Stearns' nationalisation first shook the financial world - the first significant job cuts coming from late 2007. It seems reasonable that we are therefore going to hit the bottom first too, and reach a period where things stop getting worse and headcount (and performance/earnings) stabilise. Timing is so difficult, but I am going to call us reaching that period across financial services in around 6-9mths, with us reaching the bottom of the markets in Q3 2009.
Otherwise on a work social last night, I took the opportunity to find out more details about the current talk amongst Prime Brokerage here, that we have inadvertently gotten ourselves caught up in this whole fiasco relating to yet another investment shark, Allen Stanford. Not directly of course, we would be no more likely to entrust our own funds to the financial equivalent of an East End used car salesman as we would have given a penny to Bernie Madoff.
No, the problem is that yet again Private Wealth Management have played the 'not my problem guv' card. Whereas before we had a commendable ban on any trading activity with Madoff's ponzi scheme, we seem to have let a number of our cricket-loving HNW's (high net worth individuals) go and place funds with him. As you can imagine, the internal impact has been the usual internal cover-up for now, so not much is being openly said but it is difficult to imagine we won't be openly mentioned in the press in connection to all this soon enough.
I wish I could say I was bothered, but previously market shocking stories are becoming a daily soap opera nowadays. Is it just me or is the collapse of the financial system absolutely hilarious?
Thursday, February 5, 2009
More Baracking Gets A Reaction
I am a firm believer in the need for regular, institutional change at the highest level; you only have to look at how power corrupts over time, or leads to grotesque complacency of the worst kind. For examples in politics, you need only think back to the detachment from reality of Margaret Thatcher towards the end, or New Labour now, and of course George W Bush for the last.. 8 years. Okay he's a special case but you take my point.
With institutions such as banks, that complacency (and in some cases corruption - you know who you are Bernie), has had longer to fester right up to the top. As we all know, it has been spectacularly laid to bare in the last year, what with the problems requiring vast government bail outs to save many financial institutions. A recent point of major angst with the politicians and public at large are the continuing ramifications from the presumption of bonus payments as some kind of right by many at the top of those banks which have performed worst.
One point on that is to note that some are indeed contractually guaranteed - particularly the rainmakers that bring in vast sums for a bank and could walk to a competitor in a second. However, that is a small percentage of the overall pot so it is not an excuse.
However an interesting development today was Barack Obama's latest announcement that all banks that have received bail outs will need to cap executive pay to a mere $500,000. I think that I can safely disclose that we are one of the 90% of banks that have received some kind of financial package from a government. The reaction here at the bank has been impressive - faced with the prospect of having their pay limited to such trifling levels, the order has come from the very top to immediately investigate ways to pay back the government.
It is hilarious how the moment executives at the top find the trough being emptied, they're squealing with indignation and looking for ways to get their snouts back in. So let me see - your priority is helping fund all those businesses suffering as a direct result of the systemic failure of which you have to accept a proportion of responsibility? No, it seems to be working out how to squeeze internally through the coming cull, or externally via recalling loans, to ensure we remain fully independent of the US government.
Away from the subject of bonuses, it is interesting to see that momentum is building up through the press for the strong case of investing in gold as a good option for 2009. I continue to recommend placing significant funds into a gold ETF and moving some away from Sterling and the US dollar this year, but the linked article gives a good summary with some options.
Otherwise I have found out some interesting office rumours from a recent night out, as well as confirming whether I am to be included in the coming job cuts. Both can wait for another entry.
With institutions such as banks, that complacency (and in some cases corruption - you know who you are Bernie), has had longer to fester right up to the top. As we all know, it has been spectacularly laid to bare in the last year, what with the problems requiring vast government bail outs to save many financial institutions. A recent point of major angst with the politicians and public at large are the continuing ramifications from the presumption of bonus payments as some kind of right by many at the top of those banks which have performed worst.
One point on that is to note that some are indeed contractually guaranteed - particularly the rainmakers that bring in vast sums for a bank and could walk to a competitor in a second. However, that is a small percentage of the overall pot so it is not an excuse.
However an interesting development today was Barack Obama's latest announcement that all banks that have received bail outs will need to cap executive pay to a mere $500,000. I think that I can safely disclose that we are one of the 90% of banks that have received some kind of financial package from a government. The reaction here at the bank has been impressive - faced with the prospect of having their pay limited to such trifling levels, the order has come from the very top to immediately investigate ways to pay back the government.
It is hilarious how the moment executives at the top find the trough being emptied, they're squealing with indignation and looking for ways to get their snouts back in. So let me see - your priority is helping fund all those businesses suffering as a direct result of the systemic failure of which you have to accept a proportion of responsibility? No, it seems to be working out how to squeeze internally through the coming cull, or externally via recalling loans, to ensure we remain fully independent of the US government.
Away from the subject of bonuses, it is interesting to see that momentum is building up through the press for the strong case of investing in gold as a good option for 2009. I continue to recommend placing significant funds into a gold ETF and moving some away from Sterling and the US dollar this year, but the linked article gives a good summary with some options.
Otherwise I have found out some interesting office rumours from a recent night out, as well as confirming whether I am to be included in the coming job cuts. Both can wait for another entry.
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