Saturday, September 20, 2008

Since You Asked….

Yes, Guido’s FTSE short got whacked. Had a stop-loss at 5200, so the pain ended some 250 points after the Mother of All Bail-Outs was announced by Comrade Paulson. Don’t shed too many tears for Guido, the short was put on at higher levels the Monday after the weekend Alistair Darling told us we were doomed and was traded in and out of (unproductively). The gold long is good, the EUR against GBP trade is flat.

Who really expected the wholesale bailing out of Wall Street? The Sovietisation of the Street by Paulson, the former Goldman Sachs CEO, means that never again will the U.S. be able to preach the advance of free markets to developing countries with authority. These extraordinary times have seen Treasuries bonds with zero-yield, effectively you might as well put the money under the bed.

Anyone familiar with Ayn Rand’s novel Atlas Shrugged will be able to see the coming consequences, the end of free capital markets. The voters forget at their peril how and who finances the billion-dollar chip manufacturing plants, the satellites, the billion dollar pills from high risk bio-technology that will cure disease, the multi-billion dollar networks that make us such an inter-connected globe. There will be new regulations galore, the taxpayers will be raped as they have never been raped before, it seems this is the price the U.S. authorities think has to be paid to stave off financial meltdown and a recession that could turn into a depression. The latter prospect seems a product of panic rather than reason.

The investment banking model since the 1990s was flawed not by lack of regulation, it was flawed because of poor governance. Traders and management were incentivised to take risk for reward with minimal personal downside. Bank shareholders have lost money hand over fist whilst their hired employees have been paid hundreds of millions. The complex derivative structures that underpinned sub-prime lending were opaque to the point of incomprehensibility.

The banning of short sellers is a side show, it is merely populist politicking. It will make conservative hedging very difficult, it raises the cost of capital to corporates and it will not change the underlying fundamentals. It will also create liquidity problems and a whole host of technical difficulties.

Are banks safer because it is illegal to short them? Has liquidity returned to the money markets? Are mortgage assets recovering? No, no, no. Unless Paulson announces a plan to put U.S. taxpayers on the hook for billions of dollars in risky sub-prime mortgages this weekend, this stock rally will come completely unstuck… and Guido will be short stocks again.

Gordon Brown’s Sky interview, where he blamed investment bank’s off-balance-sheet liabilities for the credit crunch, was an unconsciously revealing moment. What is the trillion pounds of debt in PFI contracts and unfunded state pensions if not Gordon’s very own off-balance-sheet liability? Gordon and Ed Balls designed the world’s biggest off-balance-sheet structure to massage the PSBR, it will have to be paid down by generations to come. Brown’s legacy will be that British children, and their children also, will be paying off Gordon’s debt bubble.

Friday, September 19, 2008

Friday Caption Contest

That LabourHome Poll

There seems to be a concerted attempt to shoot the messenger. Tom Watson, live and direct from the bunker, is trying to rubbish the poll and menace LabourHome’s editor Alex Hilton. Luke Akehurst, the Weber Shandwick spinner for arms dealers and former Gordon-loathing loyalist under Blair, turned Gordon-loving loyalist under Brown, is reading from the same script.

ConservativeHome makes Team Cameron uncomfortable but it performs a very useful function in encouraging more honest introspection and in doing so strengthens the party and makes it more responsive to the grassroots.

LabourHome has in the past been too willing to reflect the party line, failing organisations like to keep their troubles secret, honesty and openness are a sign of confidence and strength. LabourHome is not as Luke Akehurst claims “unhelpful to the Party”, it is doing it a service by holding up a mirror. To fix the problem, you first have to face up to it.

See If Gordon’s Sums Add Up

Give it a go here.

Thursday, September 18, 2008

54% of LabourHome Readers Want Gordon to Go

A survey of Labour supporters by LabourHome for the Indy tomorrow finds 54% want Gordon to go before the next General Election with 46% wanting him to stay. 57% believe there should be a leadership vote at party conference and 43% think there should not.

Miliband is the favoured successor of nearly a quarter (24.6%) of those polled…

+++ FSA Bans Short Selling +++

First they came for the capitalists…

(Guido is short FTSE Futures. What are you going to do Gordon?)

Miliband : Brown is in "Bizarre… Denial of Reality"

This morning the Guardian’s political editor Patrick Wintour quoted an anonymous cabinet minister off-the-record.
Gordon Brown’s authority was further undermined last night after it emerged several ministers sharply criticised the decision to use this week’s political cabinet to discuss Tory weaknesses rather than Labour’s own unpopularity. One member said the tenor of the meeting was bizarre and a denial of reality as we sat listening to how deep down David Cameron is not really popular”.

That cabinet minister was David Miliband. Guido knows this because David Miliband is always using the word “bizarre”, it is his favourite word in television interviews, in print and in speeches.

Usage of the word “bizarre” by Miliband:

Indy
Tuesday, 9 September 2008
We badly need a treaty to control the arms trade
It is
bizarre that we’ve treaties to stop nuclear arms, but not to stop weapons flooding into conflict zones

David Miliband interview on Radio 5 Live
February 2, 2008
“Well I think it’s a very bizarre comparison to compare Robert Mugabe’s Zimbabwe with China.

Sunday Business Post
June 22, 2008
…The other member states see themselves as perfectly entitled to decide on the basis of their own national interests – just as Ireland has – whether to ratify or not. British foreign secretary David Miliband described the idea that Britain should not take its own view of treaty ratification as ”bizarre’‘.

Daily Mail
May 12, 2008
Disease ‘could push Burma toll to 1.5m’
…Mr Miliband said the decision to go ahead with the poll, despite the crisis was ‘bizarre’.

Daily Mail
March 26, 2008
Our troops deserve full inquiry on Iraq, say Tories
..But Foreign Secretary David Miliband said: ‘There is agreement that an inquiry into the Iraq war will be necessary.’ He added: ‘Given reports from Basra today, most people would see that as a bizarre choice of priority now. We say the right time to look at these issues and review the lessons learned is when our troops have finished their work in Iraq.’

Trust Guido on this, it will be denied, but Miliband was the cabinet minister…

"Hello is That the FSA?"

If Lloyds Bank’s Victor Blank was talking to Gordon Brown about take-over plans for HBOS at a cocktail party wasn’t he breaking the takeover code’s strict rules on secrecy? Shouldn’t somebody report them?
Yesterday the headlines said “Gordon Brown orders Lloyds takeover of HBOS”. Does Brown think he can order Lloyds shareholders to vote for the deal? This is a Class 1 transaction, shareholders will decide, not Gordon.

The FT agrees with Guido, is it now official government policy to have the regulators lie to the markets via the media? If the FSA itself is now lying and breaking the laws it is supposed to enforce, is there any point reporting law breakers?

+++ Despite Central Banks FTSE Closes at New Low +++

Despite a $180 billion coordinated global liquidity flood by central banks the FTSE still closed lower at 4,880. Huge blue chip U.S. investment bank Morgan Stanley is rumoured to be in trouble and is losing clients worried about the security of their deposits. A Chinese investment fund is a rumoured buyer…

Perils of Tripartite Regulation

A co-conspirator points out just how brilliantly the tripartite authorities (HM Treasury, Bank of England and the Financial Services Authority) are doing joint up regulation.
Commenting on the soundness of HBOS the FSA yesterday morning said it was:

“a well-capitalised bank that continues to fund its business in a satisfactory way”

Alistair Darling this morning:

Alistair Darling added that without the deal the outlook was “very bleak indeed…We were onto their (HBOS’s) problem for several weeks. It didn’t just suddenly happen…”

So who was lying?

The architecture of City regulation is a mess. The FSA is despised and nobody in the City respects it. The Bank of England has been undermined deliberately by Gordon because it was a threat to his authority. The FSA should change remit and look after exclusively retail customer’s interests and the Bank should keep an eye on the City and re-take control of the Debt Management Office. The Treasury and the Bank should swap staff regularly and be on friendly terms, with the Treasury executing political influence through the Bank. The Bank is closer to the markets than the Treasury and so it should be to inspire confidence in the City…

Seen Elsewhere

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
Opinions on Key Issues By Constituency | Red Box
Britain Irrelevant Inside EU | Dan Hannan
Cameron Heading for Fall on Europe | Rachel Sylvester
Lords Speaker Spends £350 on Two Mile Limo Ride | Sun
Shapps Slaps Down Barroso “Propaganda” | City AM
Bookies v Pollsters: What We Learned From IndyRef | Paddy Power


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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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