bozo's return

Lingering Confusion

Hello all you finance gurus.

I still have some lingering confusion over the efficacy of the free market system and the competition base of capitalism as a social model.

Let me get this right...

Capitalism is freedom to choose....freedom to have whatever business idea you like and let the market decide if it works.

 

If it works, you get rich, if it doesn't you go broke.

Those people who have poor jobs or no jobs or lose their jobs.... Those people shouldn't get help from the tax payer. And if people do not have the right skill set that's something they should use their freedom to sort out.

Is that it?

Because I am a bit puzzled as to how a bank repossesses the home of one of those people, when that bank only exists because it got MASSIVE help from the tax payer. I am a bit confused that a bankCEO who the freemarket discovered was running a bank that was bankrupt still has a job... doesn;t the free market system say that person should be unemployed and having their home repossessed?

Have I missed something?

 

AV or is it PR or is it CWOFT?

I just want to say that Bozo hasn't yet decided which way to cast his vote. So any/all of the things I write in the next few days are not really campaigning, even though they are mostly pro AV.

How does that work?

Well the reason I am not certain about voting "yes" is that the devil is always in the detail and I am worried that what we get will be a non-transparent nightmare that we regret.

But I am certain that a lot of the arguments for voting "no" are so totally spurious they make me laugh, and I did want to shoot arrows at them liberally.

Because there are many things wrong with first past the post.

Argument One: First past the Post Gives strong Government

Yes it does, but is that really such a great thing? We had 13 years of Thatcherism from 1979 to 1992 Followed by a weak Major government followed by 13 years of Blairism. I am not sure what the Thatcher and Blair landslides/mandates meant as far as the hearts and minds of the electorate were intending but I don't look back on Thatcherism or Blairism (or even Brownism- indeed - still less Brownism) with any fondness. What we seem to have proved is that give any human being, even a smart one, many years of unchallengeable power and eventually they will screw up massivle and there is nothing we can do to stop them. The Poll Tax and the Iraq War are what you get from strong government.

Argument Two: Coalition Government is a nightmare

Yes it is - for the party with the most seats, but who else is it supposed to be a nightmare for? I heartily believe a coalition would have prevented the worst excesses of Thatcherism and prevented the worst excesses of Blairism. I certainly believe a coalition wouldn't have been led so easily by the nose into Iraq by George W. Or that it would have created the biggest government deficit in history (even before the bank bail out)

And who here thinks Germany is some sort of economic wasteland? Er no one....

And Germany since WW2 has had coalition government as a norm! Including now! When I lived in what was then West Germany there was coalition government and it didn't ruin my time there! Didn't seem to be holding back German economic prosperity very much either. And have you noticed that Germany, unlike us, still actually has a successful manufacturing industry? one that doesn't whine all day about China? [Well I am sure it whines - but it still exists and seems to be doing well]. Since Blair in 1997 here the Germans had a "red-green-coaltion" from 1998-2002; the so-called "Grand Coalition" from 2005-09 and the current somewhat shaky and complex CSU-CDP-FDP coalition. I am sure it is a day to day nightmare for the politicians to do deals that make everyone happy.

But what economic harm has been done to Germany in this time??????

Exactly.

Coalition Government in Germany has most certainly been a nightmare BUT NOT FOR THE VOTERS!

MY point here is not that you have to dash out and vote for AV, my point is that many of the arguments against are spurious and need to be treated with appropriate contempt.

Bozo has some thoughts on the democratic nature of the opposing systems too - but we can save those for next week.

Enjoy your long weekend.

 

Will BP be vindicated?

As some of us expected BP have finally sued Halliburton for a few gazillion, alleging fraud, misconduct, errors and ommissions and being mean to small children (probably).

 

Anyone who bothered to read between the lines and not just listen to Barak abuse Tony Hayward knew that Halliburtin would be knee deep in at least some of the fault...you cannot be the primary contractor on the rig and have all those people involved and not be at all to blame.

Who knows how long it will take to sort out this one...but there is a deeper question for business leaders than who wins in court.

BP's strategy was - and this is my term not theirs - "openly noble, putting solution ahead of finger-pointing!

At the time, their reluctance to point fingers while they were sorting out the mess and finding out the facts left them clearly in the firing line. Of course Barak's outrageous xenophobia was a factor too. But basically the only one being screamed at was Tony Hayward.

 

Cost Tony his job too.

So will they end up vindicated? And will the strategy be seen as clever?

Obviously not by stockholders who sold below £4 while BP kept schtumm...

Shareholder Value

I read a fab article written by Andrew Hill in the FT online yesterday:

Find it here.

Then let me quote the key phrase:

The blinkered drive for shareholder value and the rewards it can generate for those who lead it have turned CEOs into excellent managers of expectations rather than tangible corporate performance. One study suggests a majority of managers would avoid starting a project that would create positive net present value – in other words, one that should improve shareholder value in the long-term – if it meant missing their next quarterly earnings targets.

Wow.

So that's good isn't it?

One hardly knows what to say... and Mr Hill says a lot of it well enough, so rather than plagiarise him I reccommend going to have a read.

But I do have a question.

Is it really investors who drive this behaviour? Or is it the investor's representatives??

If I invest in a fund, the fund manager will tell me that the value of that fund can go up and down; that past perfromance...yada yada... you know how the spiel goes! The fund manager wants his clients to have a long term view. The fund manager wants his client's to believe in their ability to beat the market over a time horizon that isn't measured in quarters but in years.

Cool.

So who is it who is telling the senior management of a business that they are history if they don't meet a quarterly target? Well its the fund managers, via analysts.

The longer I stay away from the market, the more nonsensical it all looks.

 

US Debt

I had intended to blog today on AV/PR.

But I couldn't resist mentioning S&P's threat to downgrade US Debt. It immediately brought the dodgy economist (who i still think may have been a spoof) from 10 o'Clock live two weeks ago into my mind. The one with the dodgy hairdo who said the government could learn a lot from the American (debt fuelled) plan to boost the economy.

 

The debt consequences of this plan has prompted even sub-prime-debacle-egg-on-face-losers S&P to raise an eyebrow.

You know I hatethe fact that its the poor people - you know - the one's who didn't create the crisis - are the only one's paying.

You know I would love to hit the people earning over £250k really hard, and don't give a toss if they all sod off to live in Zug, or Dubai (Or Benghazi for that matter). But those people who earn those salaries are the same ones running the markets who are going to rebel at the idea of governments borrowing their way out of a market-induced crisis.

 

Irony anyone?

Assets

Are we all still comfortable about asset values?
Really?
Because this economy isn't going anywhere. And you can forget consumer spending. Unless you sell stuff bankers buy with bonuses. Because the man in the street isn't doing too good cash-wise and I am sure no one really wants a credit boom right now with no guarantees that home equity will do anything other than shrink.
And Bozo - in the process of home buying - is not talking his book!!!
Back in 2008 january ish you will find a Bozo Blog that says it won't be safe to buy assets until 2011. Well here I am believing my own predictions!
But doesn't anyone else feel there is an element of doubt?
The equity markets have been buoyant based on nothing more substantial than the fact that cash is too cheap. Remind anyone of 2006?

And if you are wondering about the impact of a US government shutdown. Well you can forget IPOs. And for the consumer confidence impact dig out episode called "shutdown" from series 5 of The West Wing.
Without even mentioning the growing cost of the failed experiment to politically force a single currency before actual economic convergence (and then allow fiscal independence!)

Let's get our perspective straight. This isn't about doom and gloom and disaster and meltdown. Its about the fact that the news overall is on the poor side of mediocre with some real risk of actual bad news. Nothing to warrant the current buoyant joyfulness of the equity and credit markets.
Now the market was able to shrug off a lot of negative indicators in 2007 before reality set in. And the major collapse of 2008 lagged way behind the signs.
Have we really got memories that short?
Well when I saw "we" I do of course mean "they". The ones with the bonuses.
The big question is: "how often can you play the 'I'm stupid not dishonest' card and keep your job and stay out of jail?"

Sent from my BlackBerry® wireless device

Real or Spoof

No one can deny that 10 O'Clock Live is pretty left-leaning. And that means not everyone will think it's as funny as Bozo does. The slaughtering the give to Ed Milliband is however priceless and likely to get as many laughs from Tories.

It's far from perfect however.

Last week, in discussing the cuts package my man David Mitchell had amassed a 3 person panel to offer views. One was an acitivist. She was passionate, very good at telling us all that was wrong with the package, and pretty crap at offering alternatives. The man from The Times, who couldn't compete in passion and charm because his support for cuts, like Bozo's comes entirely from the position of "It's crap but we have to do it" field.

But I want to discuss the final guest.

Was she a real economist? Surely she was a spoof put there to get a few extra laughs?

Don't ask me to remember her name, but frankly I will never forget her hairdo!

Anyway... among the dodgy sounding arguments she came up with was to compare the US stimulus package with the coalition efforts.

What?

Forget the ridiculous amount being pumped into the economy by the Americans (actually in specific terms I have forgotten...but it was $750 billion or something...) but if we are comparing Britain and the US let us compare Britain with the US ... there is no way this woman can be a real economist.

Firtstly the Americans can print $750 billion and we cannot. Why?

Well of other comparative reasons. The US treasury bond is THE risk benchmark for AAA. It sort of doesnt matter how bad things get, people will always have to buy them for portfolios. No one has to buy gilts. So the American move can make markets jittery, any attempt to force British Government Bonds into a saturated market will cause meltdown.

Second, the woman may not have noticed bu Gordon Brown spent the 10 years prior to the sub-prome disaster building the biggest and most expensive welfare state in the history of welfare states.

Let us compare the ten years of welfare state building in Britain with the US. Let;s compare the NHS with its American equivalent.

Oh Sh*t! They don't have one.

You stupid woman you cannot compare an apple and an orange, let alone an apple and a hand grenade.

I do so hope she was a spoof, because the national Association of Television Econimists needs to expel her if she wasn't.

I am not against the welfare state... any regular reader will know that. But I don't advocate paying for it with fictitious money. I cannot say with borrowed money, because it is always going to be paid with borrowed money - but hopefully sensible borrowed money. Gordon Brown dismantled the welfare state when he gormlessly believed all his scottish banking cronies and decided to keep borrowing their money and thrusting it into the NHS.

I don;t expect the spoof economist to realise that - especially when she seemed to think that the world's bond buyers would happily fund a UK stimulus package.

Sheesh

non Bozo banker bashing

Nice alliterative title doncha think?

I am so tempted to write a longish blog - in fact i did but then realised it was basically plagiarism!!

 

So instead let me give a plug to a fab article on page 140 of the May Tatler by Sam Leith.

 

Now not being a Tatler reader i have no idea if Sam is a ms or a Mr...but I do know its a fab piece and you should go find it.

 

The basic premise is that Zug - the home of all the rich Zurich bankers is the most boring place in the world. So "bye bye bankers off you go to Zub - we dare you!"

 

Of course maybe the want to live across the way from Iran in sunny Dubai.

Or maybe Shanghai will have them? (great place to bring up your kids)

 

Of course you could just pay a few pence more tax...

frankly I am past caring...