Thursday, October 9, 2008

Flash Mob Rumour

Don’t know much about this, but keep getting tipped off from different directions. Doesn’t sound like the usual rent-a-crowd of Trots. A disorganised flash mob, no speeches, just show up on the steps of the Bank of England…


UPDATE 17.50 :
From the comments, going around the City:

To all staff in the London Office

We have been informed by the City of London Police that a protest against financial institutions in the City will be taking place from about 3.00 pm till 6.00pm tomorrow. The protest by the ‘Socialist Workers Party’ will originate in the area of Bank Junction and the Royal Exchange. Exact numbers of demonstrators are not known but the Police will be in attendance as normal.

We will be increasing building security arrangements as a precaution. Your safety is our priority and the advice we have received is for staff to use caution and remain vigilant when travelling through the City.

Thank you for your co-operation.

So it will be a load of Trots and possibly Guido with a “No Bolshevism for Bankers” placard. Wonder if Heffer fancies a spot of lunch at Coq d’Argent and joining the demo afterwards?

Wednesday, October 8, 2008

Exclusive : Michael Howard Complains to FSA Over Pesto-Wire

City outrage over Peston’s reporting has been voiced by Michael Howard. He has written to the FSA to ask for an investigation into the leaking of intensely market sensitive information to Pesto-Wire. Good.

click to enlarge

UPDATE : During this afternoon’s debate Howard challenged Darling over the Government’s conduct. Darling noticeably did not specifically deny that the Government leaked details of the bail-out plan. Howard has also tabled a PQ asking if the Chancellor of the Exchequer “will initiate an official inquiry into the leaking of market sensitive information to the Economic Editor of the BBC relating to the recapitalisation of Britain’s high street banks”. Fingers are pointing towards Catherine Macleod, Darling’s very own Spin Mistress…

Put them on the National Economic Council

BBC reports :

Four years ago, fearful of a property crash, David and Maureen Somers sold their house and bought gold… Mr Somers and his wife Maureen claim it would be “vulgar” to say how much they invested in gold. However, he does say they sold their three-bedroom, detached house in Poole for a significant profit, and the couple have since almost doubled their money again in gold.

“Over thousands of years gold has never reached zero. The price is a risk, but at the end of the day I will still have the same amount of gold,” he says.

“There are people who probably hold bank shares that would have been seen as conservative investments and you could question what they are going to be left with.”

Gold-bugs, not so crazy now, eh?

"Vertu Blessaður" Singer & Friedlander R.I.P. Founded 1907, City of London – Bust 2008

So Guido says goodbye (in Icelandic) to Singer & Friedlander :

From: Armann Thorvaldsson
Sent: 08 October 2008 13:53
To: DL All Staff

Subject: Important Message to All

Dear Colleagues

I wrote to you yesterday about our intensive efforts to work through the current crisis and promised to give you more news today. We have worked with a number of investment banks, our parent in Iceland and the FSA over the last two weeks to explore a large number of possible options to ensure the future of KSF. On several occasions, we have come close to finding solutions but the chaos in financial markets has consistently undermined our efforts. We now face the prospect of insufficient liquidity, rapid deposit outflows and no prospects for correcting the situation in the short term.

I have therefore convened a meeting of our Board in order to consider the next step. That meeting has concluded we have no choice but to place Kaupthing Singer & Friedlander into administration with immediate effect. We will give you all more information on the implications of this decision in the course of today and ask for your patience in order to make the best of a very unhappy situation for all of us. Can I ask you to continue work in as normal a fashion as possible, cooperating with the Administrators in their work with us. This decision relates only to KSF Ltd and not its subsidiaries. They will continue to trade unless advised otherwised. We will give a more complete information update later in the day, certainly before 4pm.

You have all worked with incredible effort to make KSF a success and we were well on our way to achieving it before the credit crisis had such a sudden and disastrous effect. Now I can only ask for your help in making the end of the process as orderly and professional as possible.

I am personally gutted that it has come to this, especially in light of the fact that our problems have arisen out of association rather than any fundamental problems with the business. On the contrary I belief that we have built a great business over the last couple of years and during this time I have worked with many of the most talented and professional people I have ever met. I am very sorry.

Sincerely,

Kind regards

Armann Thorvaldsson
CEO
Kaupthing Singer & Friedlander Group Plc
One Hanover Street

Won’t be the last…

+++ Mr Bean in Charge of Monetary Stability +++

HM Treasury Press Release

Her Majesty The Queen has been pleased to approve, under the Bank of England Act 1998, the appointment of Charles Bean as a Deputy Governor of the Bank of England for Monetary Stability, for a period of five years.

This explains a lot.

Gordon’s £300 Billion Guarantee : £50 Billion Tier 1 Capital + £200 Billion Inter-Bank Guarantee + £50 Billion Northern Rock

Pretty soon we are going to be talking real money.

Guido has lost track of the repeated Bank of England interventions to try and flood liquidity into the money markets. Those alone could easily be as much as £200 billion or more.

The government bail out, never mind the Bank interventions, is secured against the hard work of Britain’s 28 million taxpayers. The government is risking more than £10,000 for each taxpayer.

UPDATE : The bail-out we are told was finalised at 5 a.m. this morning, the tri-partite authorities meeting in Downing Street was at 5 p.m. last night. Good to know that a £300 billion plan to “guarantee” the economy can be cobbled together in less time than it takes to do a school homework project. Fills Guido full of confidence.

Tuesday, October 7, 2008

Labour to Implement 1983 Manifesto Pledges

It is a quarter century since Labour’s Michael Foot signed manifesto was rejected by the British people. An unelected Prime Minister is now going to impose some of those plans on the British economy. The socialist dreams so roundly rejected in 1983 sound eerily familiar:
… a National Investment Bank to put new resources from private institutions and from the government…. Exercise, through the Bank of England, much closer direct control over bank lending. Agreed development plans will be concluded with the banks and other financial institutions. Create a public bank… set up a Securities Commission to regulate the institutions and markets of the City… Set up a tripartite investment monitoring agency to advise trustees and encourage improvements in investment practices and strategies… We expect the major clearing banks to co operate with us fully on these reforms, in the national interest. However, should they fail to do so, we shall stand ready to take one or more of them into public ownership. This will not in any way affect the integrity of customers’ deposits.

The National Economic Council of the people’s plutocrats is straight out of that unreconstructed dirigiste mindset. This isn’t going to work.

The big lie that we will hear this morning is that taxpayer’s money will be “invested” and the government may even make a profit – like the Swedes did in the nineties. Except the Swedes didn’t make a profit, Swedish taxpayers lost billions. One bank out of over 114 Swedish banks refused the deal. SEB, Sweden’s largest bank controlled by the Wallenberg family, arranged a private sector recapitalisation and returned to profitability within a year. So could the UK banks. British taxpayers are going to get screwed like they have never been screwed before.

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

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