Sounds about right

A man who was given nearly £1.6m by his father after he won £101m in the Euromillions has had his claim for more cash thrown out by a judge.

Michael Dawes, 32, took his father, Dave, and stepmother Angie to court after they stopped giving him more money. He claimed the couple had promised to ensure he and his partner, James Beedle, 34, would never have to worry about money again.

£1.6 million is a lifetime’s worth of money, no? It’s median income for the likely 60 year lifespan of a 30 year old.

Another way to put it, that’s a house and a holiday home bought outright and the pension fully paid up. Yes, life gets pretty easy once those are all paid for:

Michael Dawes was given £1m by his father and stepmother soon after their win, but the judge said nearly all of it had been spent within a month.

About £550,000 was spent on a house in Portsmouth, where Michael lived, but he also gave nearly £250,000 to friends and his partner’s family, and quit a well-paid IT job.

Aha. Living well without having to work? That’s a very, very, much more expensive proposition, isn’t it?

At one point, the pair were spending up to £30,000 a month, including £1,000 a week on groceries.

Blimey. You’d need a capital sum of more like £10 million to buy that lifestyle. Perhaps more actually, 5% return (bit high but dividends from an index fund maybe?) then tax to leave £360,000 a year left over? More than £10 million maybe.

I therefore dismiss the claim.

About right.

The Guardian gets worried because it doesn’t understand

Well, this is finance:

A huge increase in the amounts borrowed by already indebted households in Britain and the US to buy new vehicles is fuelling fears that “sub-prime cars” could ignite the next financial crash.

British households borrowed a record £31.6bn in 2016 to buy cars, up 12% on the year before, said the Finance and Leasing Association on Friday. Nine out of 10 private car buyers are now using personal contract plans (known as PCPs), which have boomed since interest rates fell to historic lows.

Terrors, terrors.

Some of the car-leasing loans in the US and the UK have been packaged into asset-backed securities, to be sold on to investors such as pension funds. This was an asset class that played a ruinous role in the credit crunch, except this time the collateral for these assets is cars, not houses. The ratings giants, Standard & Poor’s and Moody’s, have given most of these batches of loans a triple-A safety rating.

The 2008 problem was that those bonds were *not* sold on to end investors like pension funds. Instead they sat around on bank balance sheets, often leveraged up 25 to 30 times the capital base supporting them. That was the problem – value impairment mean the banks had to dump them before their entire capital base was exhausted setting off a spiral of downward valuations.

If these bonds are with unleveraged final investors then this will not and cannot happen. Thus there’s no problem. If values fall then pensions fall a tiny bit in value. Shrug.

OK, this is possible

Christian Noyer, the former governor of the Bank of France, has been on a City charm offensive, trying to convince financial institutions to set up over the Channel, arguing that the French capital would be more attractive than post-Brexit Britain.

No, not that bit, this bit:

Mr Noyer’s presentation concedes France is not as attractive as the UK for tax, but focuses on its relative merits compared with Belgium and Germany.

That’s possible of course, but claiming that a place is only 193 rd on the list of WTO nations is not really all that persuasive really.

Whoo Boy, aren’t we surprised?

Exiled Gambian ruler Yahya Jammeh stole millions of dollars in his final weeks in power, plundering the state coffers and shipping out luxury vehicles by cargo plane, a special adviser for the new president said on Sunday.

Note that looting the central bank is said to have brought him as much as $9 million. Not a lot to loot in a poor country…..

Not but, because

The pound has enjoyed its strongest week against the dollar in seven years, but stock markets suffered a sharp fall amid growing concerns over a possible Donald Trump presidency.

FTSE and sterling are inversely linked at present. 75% of FTSE 100 revenue is not in sterling. Thus the value of those profits rises as sterling falls, falls as sterling rises.

Sure, there’re millions of other things which affect all prices, of course, but these past couple of months at least there’s been a pretty direct linkage between these two.

As I keep saying and almost no one else seems to be.

No, not really

UK gilt yields have doubled since the vote, forcing the Treasury to pay more to finance its debts.

The Observer doesn’t quite get this, does it?

Rising yields means that new debt issued will carry a higher coupon. Makes absolutely no difference whatsoever to debt already issued.

Yes, obviously there could be liquidity mismatches

Turmoil in bond markets and a spike in the number of investors wanting to withdraw money “raises questions” about the suitability of popular bond funds, leading analysts have suggested.

Bond funds – where savers’ cash is pooled and then invested in loans issued by governments and companies – are among the most popular holdings in savers’ Isas and pensions.

But analysts Manuel Arrive and Alastair Sewell of Fitch, the ratings agency, this week questioned whether these funds could withstand a rush to the exit by investors alarmed by a fall in bond prices.

They have suggested restricting withdrawals to weekly intervals and requiring more advanced notice as potential countermeasures.

They argue that while these funds allow withdrawals to be made on a daily basis, their managers may struggle to sell holdings quickly enough to be able to pay out. The technical term for this is a “liquidity mis-match”.

Mr Arrive said current markets raised doubts “about the suitability of open-end, daily traded funds for less liquid or illiquid assets”.

Well, err, quite. In fact, who thinks open ended funds in illiquid securities is a good idea in the first place?

So here’s a question

Had a quick google and can’t immediately see anything.

Anyone have a link to something about the size of the financial sector in various countries? Particularly interested in wholesale. So, not retail banking, insurance etc, but the wholesale markets.

We know numbers like there’s more people working in The City than there are populace of Frankfurt. But I’d just love to see a proper enumeration of how its distributed.

Just Amaaazing!

Paedophile footballer Adam Johnson is still earning £5,000-a-week despite being locked up for sexually abusing a teenage fan.
Former Sunderland star Johnson was jailed for six years for engaging in sexual activity with a besotted 15-year-old.
The 28-year-old’s trial at Bradford Crown Court heard that he had kissed and sexually touched the girl in his Range Rover, in a secluded spot in County Durham.
The winger, who was capped 12 times for England, used to earn £60,000-a-week while under contract with Sunderland.
The Black Cats sacked him after he plead guilty to the child sex offences, but it has emerged that Johnson will not be strapped for cash when he is released from prison.
The Daily Star reports that thanks to shrewd property investments and high interest funds before he was convicted, the Premier League star is set to take home around £250,000-a-year without kicking a ball.

Astonishing, that someone should invest their own money.


Wells Fargo has fired 5,300 people after government regulators discovered that employees of the US bank had created millions of phony bank and credit card accounts to boost their sales figures.

They were opening the new accounts and getting the cards so as to get the bonuses for opening new accounts and issuing cards…..

That’s, err, pretty widespread. Senior management really, really should have known if something that large was going on.

I dunno, I think not even

Sir Philip Green is trying to end the threat of legal action against him over the sale of BHS by writing a cheque for more than £300 million that would help to plug a hole in the company’s pension fund.

The problem with these sorts of stories is that you never know who is doing the briefing.

Is this Green saying that everyone should shut up, he’ll sort it out? Or is it someone putting pressure on Green to up his offer?

And what if, when interest rates rise again? And large parts of that funding deficit disappear. Does he get his settlement back again?

Well, yes, seems logical

Pensioners could lose nearly a third of their retirement pot under Government plans to save companies being crippled by growing pension costs, analysis for the Daily Telegraph has found.

The entire aim would be to reduce the amount that must be paid in. This is going to lower the amount that can be paid out.

This is the point and purpose here – how to screw pensioners.

Alternatively, you just can’t trust that Curajus State, can you?

So here’s a new version of an old scam then


I am writing to inform you that our financial Company, RAYSTORM INVESTMENTS LIMITED(REG No: 05363671) located at Suite B 29 Harley Street W1G 9QR London,United Kingdom is currently offering Bank Guarantee(BG) and Standby Letter Of Credit(SBLC) for lease at five percent(5%) and purchase at forty percent(40%) from Issuing Bank, HSBC BANK PLC LONDON,UNITED KINGDOM.

Kindly reply if interested or for further enquiries.

Best Regards,
Gerhard Sander
Provider’s Mandate, Raystorm Investments Ltd

Never stop, do they?


According to accounts just filed at Companies House, BHS saw its pension scheme deficit rise to £139m for the year ended 30 August, from £136.6m the year before. After a £27.8m tax credit, the net deficit was £111.1m, up from £109.3m.

The pensions deficit is one of the biggest challenges facing Retail Acquisitions, which is backed by a number of investors including brokers and lawyers. Its largest shareholder – Dominic Chappell – has a chequered CV that includes bankruptcy.

Mr Ralfe warned that it would be tough for Retail Acquisitions to trim the deficit. He believes that, as at March 2015, the underlying deficit could have sunk a further £20m into the red.

He told The Independent: “The £139m pre-tax deficit at August 2014 would likely have risen to at least £160m by March – a higher value of assets will be more than offset by a higher value of pension liabilities, as long-term interest rates fall to new lows.

Not all of that £700 million is really Sir Philip’s problem, is it?

And it feels really, really, weird to be, so far as I’ve seen at least, the only person making this simple point.

What confuses me more though is, well, why isn’t Green himself telling everyone this?

Interesting question

Anyone know how to find the accounts for The Guardian (or GMG perhaps) pension fund? I’d love to see what has happened to that since 2008. Would be fun to see if it’s quite the disaster that the BHS fund is…..

As I’ve been saying

The BHS pension thing isn’t really about Green and the dividends at all:

Mark Carney has just made Sir Philip Green’s life even more difficult. The retail tycoon’s bid to bail out the BHS pension scheme, and hold on to his knighthood, could have soared to more than £700m after the Bank of England governor presided over a cut in interest rates last week.

Adding to the pressure, the Bank also pumped more cash into the UK economy in a move that hit gilt yields – the return on government debt.

The cut in borrowing costs to 0.25%, combined with a new round of quantitative easing, sent gilt yields crashing to a new low. This could add another 7% to pension scheme deficits, according to consultancy Hymans Robertson, which would add nearly £50m to the BHS bill.
A plunge in the value of gilt yields after the EU referendum contributed to a near-19% rise in the average value of pension deficits controlled by the PPF between February and June. That suggests a rise of about £100m for the BHS scheme’s maximum deficit, taking it to £670m. Last week’s action by the Bank of England has sent it soaring again.

The dividends came out up to 2004 or so, In 2006 the scheme was in minor (£30 million or so) deficit. It’s the change in investment returns since then which have killed that pension scheme.

And no, there’s not that much in law to state that Green is liable for it either.

But of course we want to have regional banks!

One of the demands of those economics conservatives, the British left and assorted progressives, is that we must have regional banks again. Because, you know, well, regional banks YEAH!

The problem with this being Chesterton’s Fence. We used to have regional banks, why don’t we now? Because we had them, the market considered them and then they all merged to become national banks.

But Chesterton’s Fence. Why did they merge?

Because a regional bank can cause terrible, terrible, problems if it gets into trouble:

From a distance, Vicenza does not look like a city engulfed in turmoil. On the elegant Corso Andrea Palladio, named after the Renaissance architect whose work defines this city, a finely dressed woman clutches a Chanel handbag during her evening passeggiata. Locals sit back and enjoy their Campari spritz cocktails in the July heat. A black Maserati rolls slowly down the street.

But this apparent serenity belies an ugly truth. The regions of Veneto, where Vicenza is located, and Tuscany are the epicentres of Italy’s banking crisis, which has cost citizens hundreds of millions of euros.

If there’s that one dominant regional bank then it getting into trouble can bring the whole region to its knees:

Wealthy northern Italian manufacturing strongholds like Vicenza were the financial engine behind Italy’s postwar economic boom, and are critical for the country’s hopes today. About 30% of Vicenza’s 100,000 companies have a direct relationship with BPV, according to Variati, and those companies need lines of credit and support.

“What I hope, as mayor, is that the bank stays as close as it can to the companies. Those 30% cannot be abandoned, they have to be supported if they are healthy. BPV will be able to survive over time if the territory is strong. There will be no future for the bank if the territory is poorer,” Variati said.

The flip side is also true. Imagine a regional economy with a strong specialisation. That major industry (and in Italy it’s likely to be a cluster, hundreds or thousands of firms all working in roughly the same industry. There’s one little area that produces most of the world’s spectacle frames for example) tanks, what happens to the bank?

Quite, that’s why regional isn’t the way to go, you want banks that are geographically diverse so they’re not exposed to that one industry or one geography risk.

Which brings us back to Chesterton’s Fence and why we used to have regional banks and now do not.

Why don’t we have regional banks? Until that question is answered, A Reverse Chesterton’s if you like, we cannot sensibly discuss whether we should have them again.

And of course the moment anyone says we should have local banks with local worthies (usually, local politicians, unions and locally based businesses) running them we have only to point to Spain’s cajas. Absolutely every one of which went bust from memory.