Tuesday, October 7, 2008

Guido’s Plan to Stabilise UK Markets


Gordon, Alastair, Mervyn and FSA boss Lord Adair are meeting at 5pm today to figure out their plan to stabilise markets. The FT is pointing the finger at Pesto for bank shares collapsing today. The banks concerned have denied his story, it appears his report was the result of a briefing about possible plans. There is real anger in the City because of his reporting. Peston has single-handedly inflamed the situation.

Pesto-Wire Causes More Misery

The FT’s Alphaville blog calls him “Pesto-Wire” and mocks him for replacing the official Regulatory News Service. He is a bit of a market menace because his reports are perceived as based on sources in 10 & 11 Downing Street. So he is a market mover. Guido has thousands of readers in the City and this email is typical of the feeling towards him in the Square Mile:


Dear Guido,

The Peston wrote a blog note this morning in which he suggested that the banks had “asked” the chancellor for capital injections. He did so without being able to be clear on the names, terms or size of such a transaction.


Since it is known that he speaks with the authority of Downing Street, UK banks crashed approximately 20 – 30% on the news taking a (tentatively recovering) market with them. The volatility, of course, is much worse than normal because there are no longer any short sales of banking stocks to absorb the risk.


Had the banking stocks been allowed to follow the market and trade naturally, they might well have been able to continue to go to the market for new capital (Lloyds did this on the day of the HBOS announcement with great success). Of course, this government’s need to be constantly seen to be doing something has triumphed and Peston’s attempt to make the chancellor look important has resulted in the largest one hour crash in banking stocks in living memory on the London market.


We have a regulatory announcement system PRECISELY to stop this kind of activity If material talks take place, a company must announce with absolute clarity what is contemplated so that shareholders are able to judge simultaneously and equally the likely impact on the stock.


Once again, the political imperative to make Gordon Brown look involved and competent has put in jeopardy the already fragile UK banking system and the markets upon which it relies.


Had a hedge fund published this kind of speculation while trading in the stocks, they would now find themselves the subject of an FSA investigation.

Quite. See also Who Told Peston?

UPDATE : RBS in a terse statement say “contrary to press speculation, RBS did not make a request to the Government for capital.” Pesto on the World at One basically shrugged his shoulders when Martha said to him “presumably they mean you”. Carnage in the markets, the banking system further destabilised, billions change hands and all Pesto can say is “ooops”.

+++ RBS Down 39% +++

No short-sellers were involved this morning. Yet Gordon and Darling said they were banning short selling to protect financial institutions (Cable, who should know better, cheered this on). Guido and most objective market observers said it was irrelevant. Today’s market action proves the point. QED

What a Mass Bank Bail-Out Does to the Currency

This is what could happen to the pound if the Treasury decides to print cash to bail out collapsing banks. The Icelandic Króna has lost 40% in value in three months. The Icelandic Króna is not the Great British Pound, the UK economy is far larger and hopefully stronger. Little Iceland could go bust and end up begging the IMF, a humiliation suffered by Britain under the last Labour government. Nothing, however, is impossible.

The FT reports some good news; $500 billion in derivatives contracts related to Fannie Mae and Freddie Mac were settled yesterday. Friday, 17 October, sees $400 billion of Lehman Credit Default Swaps (CDS) come due for settlement. If this goes through without mishap, market liquidity could improve as fears of systemic failure recede and the biggest ever stress test for derivatives contracts passes.

If…

Monday, October 6, 2008

PLP Changes Bets

The collapse of the Miliband putsch and reports from the PLP that there is to be an end to hostilities” has made Guido shift his bets. Guido is now backing a May 2010 general election date with the Labour Party led by Gordon Brown. (Incidentally, you can get 12 /1 on Brown leading his party and Cameron not, an outside bet if you feel lucky.)

It seems to Guido that not even a disaster in Glenrothes will divert the Labour Party from its lemming instinct.

Newsnight Mess Up the Market Report Yet Again

Kirsty correctly informed us that the pound had “tumbled almost one and three quarter cents” yet the graphic had it up +1.74 cents. Viewers have to guess the truth, one wonders does anyone at Newsnight actually care?

Guido watched Randall Live on Sky earlier this evening interviewing Martin Sorrell. An adult conversation about business and the markets with some interesting insights. Sorrell explained what he was up to re-domiciling WPP in Ireland. It wasn’t at all the hectoring quasi-Marxist business bashing that so often characterises the BBC’s reporting – which might be fine for Guardian readers but is pretty tiresome for people interested in business news. Randall is recommended.

Clegg : Mandy Was Poisonous to Me Too

Nick Clegg is recounting to acolytes that back in 2004/5 when he was still an MEP he had dinner with Mandelson in Brussels. Over the courses Mandy spent most of the evening being vitriolic about Brown.

No doubt this will be attributed to LibDem propaganda and dirty tricks. Everyone else is clearly lying except Mandy…

Just as Well They Banned Short Selling, Eh?

As the markets tank the question is how low can we go? There is quite simply no immediate floor for the FTSE 100, after 4500 the next level is the January 2003 level of 3600, a drop of some 20%. Think that is impossible? Stocks are down more than 20% since the beginning of the year.

So it isn’t hard to see that kind of market capitulation happening. In the tech bust of 1999-2000 many stocks fell 90%. Some bank stocks have already dropped 90%. There is nothing government can do to alter the reality and this has to play out. Tokyo had near zero interest rates for the best part of a decade (sorry Vince that was no panacea). The liquidity problem is/was a precursor to the solvency problem. Governments can flood markets with liquidity but that can’t fix insolvency. This is going to be painful.

Politicians who claim to have solutions to the credit crunch are infantalising the electorate. The best they can do is ameliorate the problems. They can’t alter the underlying reality. Over-priced assets are crashing and bringing down the banks – not all – some like HSBC are relatively unscathed. There are pluses as well, if you are in your twenties you will have a better chance of getting on the property ladder now…

Rich & Mark’s Monday Morning View

Sunday, October 5, 2008

Meet the New Deputy Leader of the Commons

Another serious person for serious times. Chris Bryant is the deputy leader of the house. His main qualification for this is that he is a Brown loyalist, one of the curry house plotters who can be relied on to be alert to and determined to frustrate the ambitions of Miliband.

Presumably that is the reason for the installation of the strange Sion Simon as a minister for the crown. Tom Watson also remains close to the centre of power in the Cabinet Office where he can continue to brief against internal enemies of the the Prime Mentalist. Watson will have been pleased with himself having seen off Stephen Carter. Nick Brown as chief whip is the ultimate factional enforcer.

This government intake are the second-raters who would never have prospered during New Labour’s prime. They are distinguished only in the way that Kamikaze pilots were distinguished in their loyalty to the emperor. It is going to be a heck of a lot of fun, and a dirty fight to the death.


Seen Elsewhere

5 Things We Learned From Guido’s Party | GQ
Revealed: Guido Fawkes Anniversary Dinner Guestlist | Peter Oborne
More Owen Jones Errors | Michael Ezra
Why Should Men Get Equal Maternity Leave? | Laura Keynes
Dentists Have Last Laugh Over Sneering Keynes | FT
Why’s Clegg Giving Men Paternity Leave? | Conservative Women
Cam Cannot Stem EU Immigration | David Keighley
9 Mansion Tax Questions for Ed Balls | TPA
Politicians are Lying to You About Immigration | Alex Wickham
Give Journalists Public Interest Defence in Law | Guardian
Cameron is Going to Have to Deal With UKIP | Dan Hodges


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Find out more about PLMR


Chris Bryant talks to the Times Diary about a famous gay actor:

“I don’t think I’ve had sex with him. He says we had sex in Clapham. I’m fairly certain I’ve never had sex south of the river”



Progressive Inclusion Champion says:

Great to hear Carswell call for inclusive policies and that UKIP must stand for first and second generation immigrants as much as the English.


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