Tuesday, July 3, 2012

Diamond Is Not Forever

Don’t buy a newspaper this morning – it’s already out of date with the musical chairs:

“Barclays today announces the resignation of Bob Diamond as Chief Executive and a Director of Barclays with immediate effect. Marcus Agius will become full-time Chairman and will lead the search for a new Chief Executive. Marcus will chair the Barclays Executive Committee pending the appointment of a new Chief Executive and he will be supported in discharging these responsibilities by Sir Michael Rake, Deputy Chairman.

The search for a new Chief Executive will commence immediately and will consider both internal and external candidates. The businesses will continue to be managed by the existing leadership teams.

Bob Diamond said “I joined Barclays 16 years ago because I saw an opportunity to build a world class investment banking business. Since then, I have had the privilege of working with some of the most talented, client-focused and diligent people that I have ever come across. We built world class businesses together and added our own distinctive chapter to the long and proud history of Barclays. My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as Chief Executive. The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen.”

Diamond has nothing to lose now at tomorrow’s Treasury Select Committee appearance. He’s unlikely to go out quietly…

Sunday, July 1, 2012

FSA’s Barclays Report:
Staff Believed Bank of England Sanctioned LIBOR Scam

This is from page 36 of the FSA Notice on the Barclays LIBOR fixing scam:

Robert Peston has identified the senior individual at Barclays to be Bob Diamond and his interlocutor to be Paul Tucker, deputy governor of the Bank of England. If it turns out that, as Guido suspects, the Old Lady was encouraging Barclays to downplay its LIBOR funding costs to help maintain calm, we have a right old regulatory pickle. The Bank was in all likelihood encouraging Barclays to break the rules for the greater good of the City of London…

Hat-tip: Jim Pickard

Saturday, June 16, 2012

GDP Growth Was Higher in the 1930s

On the Today programme yesterday morning Ed Balls claimed Osborne has made a giant mistake and cuts in public spending are the same mistake made by Snowden in the 1930s. Balls is wrong, as a recent pamphlet from the Centre for Policy Studies by George Trefgarne shows. After the 1929-31 Wall Street Crash the British economy recovered rapidly in the 1930s:

If only we currently had a growth rate like they averaged in the thirties…

Thursday, May 24, 2012

Grexit Trading

For a couple of years Guido used to report his financial market trading in a box in the blog’s right hand column. It was popular with a few readers, nowadays Guido trades occasionally and just tweets about it. Readers still ask how the market trading is going, the above chart shows how it has been going this year so far, each data point is a closed trade. For the first couple of months Guido was long and wrong on gold, which hurts when you are over-leveraged. Since March Guido has been trying to sell a break in the Euro, as the chart shows it wasn’t really going anywhere until a couple of weeks ago when it dipped below 1.30 to the US dollar before hitting new lows for the year yesterday. Making back all losses for the year and some…

The CityAm Active Trader conference saw 650 traders gathered in the City. Guido spoke to them about the pros and cons of trading on the back of your political analysis. If you are interested in that kind of thing (and why the tooth fairy made 7 year-old Miss Fawkes cry) the speaking notes are here. Just don’t tell Mrs Fawkes…

Friday, May 18, 2012

Alexis Tsipras, leftist leader of Greece’s Syriza party, threatens…

“If they proceed with unilateral action on their side, in other words they cut off our funding, then we will be forced to stop paying our creditors, to go to a suspension in payments to our creditors.”

Thursday, May 10, 2012

Greek Money-Go-Round

The Eurozone political class are desperate to keep the show on the road and admittedly they have managed to do so for longer than many, including Guido, expected. Nothing has so far stopped them in their determination; not economic logic, democratic votes nor civil unrest.

Today Eurozone governments are sending €4.2 billion to Greece to enable it to repay the European Central Bank €3.3 billion for bonds maturing a week on Friday. They are repaying themselves with their own coin.

The Greeks will never repay all the loans, they mostly voted for parties who explicitly reject the bailout deal because the voters realise it is not Greece that is being bailed out. The European banking system and the banks that lent money to Greece is being bailed out. The sooner Greece exits the euro the sooner the money-go-round ends and reality hits the Eurozone.

Monday, April 23, 2012

Left-Wing Hollande Would Trigger €urogeddon

Guido shorted €uros last night as soon as the Kiwis got to their desks and the currency markets opened. French Socialist Francois Hollande looks set to become President of France and the Dutch government has fallen apart. International investors are not going to look at that kindly, Guido also has a sense that the election of a left-wing president in France who actually implements a left-wing agenda would frighten the bond markets. Hollande will probably tack to the centre once in office, he is after all only a politician making election promises. If however he sticks to the left-wing agenda that his rhetoric promises, the big macro-hedge funds will take the view that French bonds can join the PIIGS (Portugese, Irish, Italian and Spanish bonds) on the sell list. In government Hollande has to choose between his rhetoric and the reality of the bond markets.

The ECB has already dangerously leveraged up support for the PIIGs via Long Term Refinancing Operations (LTRO). Leveraging up the ECB’s capital base has allowed it to put nearly €1 trillion of PIIG sovereign debt on its books, at a massive leverage ratio of nearly 40 to 1. If the ECB were a marked-to-market hedge fund instead of a Central Bank we would say it was investing recklessly, a mere 2.5% market move against it would wipe out all of its capital. The market doesn’t move it against it because it massively intervenes to support its own position.

If however the German Bundesbank decides that the ECB can’t go on literally doubling the chips on the table – up 106% since last year – the €uro as is could be too big to save. That is why all Osborne’s Treasury’s protestations about the IMF always getting its money back count for little. The US and China want to see Germany bet everything on the €uro before they join the rescue party. German politicians – including those of the left-of-centre SPD – expect Hollande to govern from the centre whatever he says on the hustings. British left-wingers hoping for a left-wing surge on the continent sparked by Hollande should be careful what they wish for, it would trigger the end of the €uro. If Hollande abandoned Sarkozy’s deficit reduction programme Germany would probably seek alternative arrangements – a hard-€uro Fiscal Union made up of Northern Europeans who run their affairs like the Germans and a looser soft-€uro of Southern Europeans who overspend. The dream of a united continent of Europe with one currency would be over…

Sunday, April 15, 2012

Irish Taxpayer Sacrificed to Prop Up Eurozone Banks
German ECB Board Member Speaks Truth
ECB Press Office Erases Remarks from Transcript

On Thursday Dublin hosted a speech by Jörg Asmussen, a member of the Executive Board of the ECB, which in monetary and fiscal terms is now effectively the ruling neo-colonial power in Ireland, with German financial ‘advisers’ having been present in the Irish treasury for four years. Herr Asmussen was until January the advisers’ boss as State Secretary at the German Finance Ministry, responsible for Fiscal and Macroeconomic Affairs, Financial Markets and European Policy. When he speaks the Irish political and financial elite listen.

What they heard him tell them in a speech to the IIEA think-tank was a technocratic “steady as she goes”. Praising first the painful in the short-term reductions in state spending (10% cut in 2011) and the consequent expansionary fiscal contraction which has seen economic growth return and the trade deficit closed. Asmussen then spent a lot of time justifying why Irish taxpayers will have to bailout Anglo-Irish Bank bondholders for decades. The need for that long-term pain is not credible. 

Guido has long argued that the bailout of Anglo-Irish Bank was done to protect the investments of German banks (see Is the ECB Forcing Ireland to Protect German Investments? October 2010, Feck Off Euro-Socialists November 2010).

In a crucial section of his speech (audio at 27 mins 30 secs) Herr Asmussen says:

“The decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy, decisions taken by the Irish authorities such as these are not lightly taken and the consequences of subsequent actions are weighted carefully, it is true that the ECB viewed it as the least damaging cost to fully honour the outstanding senior debt of Anglo however unpopular that may now seem, the assessment was made at a time of extraordinary stress in financial markets and great uncertainty, and protecting the hard won gains and credibility from the early successes in 2011 was also a key consideration and the main reasoning was to ensure that no negative spillover effects would be created to other Irish banks or to banks in other European Countries.”

Note that last line emphasised in bold. In October 2010, days after the then Irish finance minister refused in parliament to name Anglo-Irish bondholders, Guido revealed the bondholders list in a story that was followed up worldwide. German institutions figured prominently.

It is, as Herr Asmussen says, a matter of great controversy in Ireland that future generations of taxpayers have been sacrificed on the altar of the Euro to protect German banks. Could that be why the official transcript of the speech erases his candid admission?

“… Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled-over to other Irish banks.”

The shameful truth is that Irish politicians of all parties have gone along with the Bundesbank / ECB’s efforts to prop up their banks and the Euro project at the expense of their own people’s interests. Another small nation on Europe’s periphery – Iceland – let its banks default and has undergone an awesome recovery. Ireland got it from the horse’s mouth on Thursday, the ongoing bailout pain is for the greater good of other banks in Europe.

Hat-tip:  SpreadBetting.com via Declan Ganley

Thursday, March 22, 2012

Osborne Biggest Loser in Budget

Osborne’s budget has gone down like a bucket of sick on the front-pages this morning. As long as we have flat-lining growth and a failure of political will to tackle spending, all fiscally-neutral budgets will be like this, identifiable ‘losers’ will out-number identifiable ‘winners’. The losers this time are those who were prudent enough to save for their retirement. The so-called lucky generation of baby boomers who had a working life in a long term growing economy and an overly generous welfare state which has now impoverished their children and grand-children. Some might spin this as a bit of inter-generational payback, others as an unjust punishment of those who saved for their retirement. Pensioners have a propensity to be voters…

Osborne is spending more than Brown, borrowing more than Brown and taxing more than Brown. The official numbers revealed yesterday show that spending is still rising in real terms, there is no hope of for an “expansionary fiscal contraction” if there is no fiscal contracti0n. The national debt is still rising. The coalition government’s self-defined primary mission, to close the deficit by the next election, is on course for failure. As long as this obsession with fiscal neutrality and timidity towards cutting spending continues the tax burden will not be reduced, the debt will not be reduced and growth will flat-line. Fiscally neutrality is just another phrase for tinkering with the tax burden.

The bond markets already know the government is going to miss the deficit target. All the fast growing economies in Asia and the Americas have lower tax economies than the UK and Europe. A dash for growth stimulated by across the board tax cuts will not as Osborne fears be punished by the bond markets, that is a fundamental mis-reading of bond market mentality. Osborne knows bond markets think long term, that is why the Treasury is contemplating issuing 100 year bonds. Bond traders understand that broad tax cuts are a real stimulus that will lead to a more dynamic growing economy which will reap more tax revenues long term. Why are we waiting?

Wednesday, March 21, 2012

Budget Bingo

Click the above to download the PDF with hyperlinks. Rules are simple: choose one phrase, policy or scenario from each row, so eight overall. Listen out during the Chancellor’s statement, first to six wins. Don’t forget to shout “Budget Bingo”!


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