Finance

Yields work two ways of course

City centre landlords are cashing in as surging tenant demand means yields have jumped this year.

So far in 2021, the average investor purchasing a buy-to-let in a city achieved a gross yield of 5.3pc, according to Hamptons estate agents. This was boost of 0.6 percentage points from 2020, when returns slumped in the wake of the pandemic.

This being – or at least could be – neatly explained by capital values having declined by the necessary amount. Yield is, after all, rent as a percentage of that capital value……falling prices not being the usual background to people “cashing in”.

Clearly and obviously a bounder

That or a peasant.

Look, the point of our having the Cabinet picked from Eton’s finest is that they’ll know these things, instinctively.

Urgent reforms of the financial system are needed in the wake of the Greensill Capital scandal to stamp out abuses that risk allowing inappropriate people to take control of banks and the outsourcing of regulation to third parties, MPs have warned.

Man doesn’t unbutton his jacket when he sits down. Why wasn’t he horsewhipped?

Secured creditors get paid, yes, and?

Lady Tina Green, wife of the former retail tycoon Sir Philip, has been handed £50m by Topshop’s administrators, even as pensioners and smaller suppliers face a further wait to recover what they are owed by the collapsed chain.

The Green family’s Aldsworth Equity, incorporated in the British Virgin Islands and controlled by Lady Tina Green, received the payout in May.

The money was lent to Topshop as part of an emergency restructuring in 2019 and secured against a former warehouse in Daventry, in Northamptonshire.

The important word in those three paras being “secured”.

Entirely quite so

Taxpayer losses linked to the collapse of Greensill Capital could have been avoided with proper due diligence, the spending watchdog has concluded.

A 56-page report into how the finance firm advised by David Cameron was given access to the Government’s Covid support schemes found that the state-backed bank that approved Greensill as an accredited lender could have been “more sceptical” when dealing with the firm.

And if we hadn’t lent them the money they couldn’t have lost it.

We’re back at Hayek. It’s not possible to know everything about an economy. Therefore all decisions are taken with incomplete information.

Fair enough, Greensill was obviously dodgy etc – parts of the business were entirely fine but not all of it – but the statement “more diligence would have avoided loan losses” is always true of every bank, every loan and every loss.

How very clever

And also rather risky but still:

Billionaire Peter Thiel, one of the founders of PayPal, has used a retirement account designed to help ordinary Americans save for their golden years to amass a $5bn tax-free nest egg, according to records obtained by ProPublica.

Thiel, a vocal opponent of higher taxes, is one of a number of ultra-rich Americans to use a Roth individual retirement account (IRA) to amass a tax-free fortune.

Roth IRAs were established in 1997 to encourage middle-class Americans to save, tax-free, for retirement. In 2018 the average Roth IRA held $39,108. The proceeds of a Roth IRA are tax-free as long as they are not withdrawn before the account holder reaches 59.5 years old.

Records obtained by ProPublica show that Thiel, 53, placed 1.7m shares of then-private PayPal into a Roth IRA in 1999. At the time annual contributions to the plans were capped at $2,000. The shares were valued at just $0.001 per share.

Within a year, the value of Thiel’s Roth increased from $1,664 to $3.8m. Thiel then used his Roth to make highly lucrative investments in Facebook and Palantir Technologies, according to tax records and other documents obtained by ProPublica. By 2019, Thiel’s Roth held $5bn “spread across 96 subaccounts”.

The whole investment gig has been run through his IRA. Entirely, wholly, legal and all that.

One implication of all this is that he’s long term investing. Putting it to use in the economy for decades, none of this short term profit making for him. But of course they’ll be screaming about that too.

One of these trivial pendantries

The founder of Wise is set to become a paper billionaire next month as the fintech company tees up a £5bn stock market listing.

Kristo Käärmann, who set up the London-based money transfer company formerly known as Transferwise in 2011, is set to own stock worth a fortune when the company goes public next month.

Well, no. He currently owns stock worth a fortune. Yes, the listing and the liquidity might increase that amount. But if something is worth £5 billion next month then it’s a very reasonable bet that it’s worth some billions this month already.

That is, the listing might do all sorts of things to his fortune but it doesn’t actually create it.

I keep having to point this out

Another float flops as Made.com shares slump
Shares in online furniture retailer close just under 200p float price, leaving it worth than a fifth less than its expected £1bn valuation

If you sell something for more than it’s worth just after you’ve sold it then you have sold succecssfully. If whatever it is you’re selling soars in value immediately after you’ve sold it then you’ve been unsuccessful, you’ve left money on the table.

Sure, there’s a difference between short and long term and all that. Even so, the price falling immediately after you’ve sold means you got a good price for it, you were successful.

On the subject of corporate buying of housing

So, why have the corporates gone to buy houses?

QE.

What’s the point of QE? To lower the long term risk free interest rate. Therefore people must, in pursuit of income and yield, move out along the risk curve.

So, why do corporate buyers invest in housing? They’ve moved out along the risk curve in search of yield.

QE works that is….and if you want to stop it then stop QE and allow the risk free interest rate to rise.

Tracing bitcoin

Deputy Attorney General Lisa Monaco said investigators had seized 63.7 Bitcoins paid by Colonial after last month’s hack of its systems that led to massive shortages at US East Coast gas stations.

The fact that investigators “could trace the untraceable and seize it might be undermining the libertarian, free-of-government-control case,” Jeffrey Halley, a senior market analyst at Oanda, told Bloomberg. The implications of that may have provoked the selling, he said.

Good grief, the entire design of the system is that every transaction, every single coin, can be traced from the Year Dot to today. You may not know who owns it but given time and effort every single one can be tracked.

Idiot

The London Stock Exchange has been criticised for helping the Belarusian government to raise $1.25bn (£880m) of debt weeks before a “rigged” election in Europe’s last dictatorship.

Well, you know, maybe. Although asking a stock exchange to determine political legitimacy has certain dangers of its own. Imagine someone the left likes not being able to raise money?

There have been concerns for years that the City is too eager to welcome money from regimes with a poor record on human rights and corruption.

That’s distinctly silly. Because they’re taking money out, not putting it in.

Independent central banks

Yes, this is Ambrose being Ambrose:

Markets are losing faith in the Federal Reserve’s credibility

But this speaks to the P³

He compared the Fed’s insouciance to the onset of the 1970s. Others see echoes of the 1940s when the Fed was co-opted by the Roosevelt and Truman administrations to ensure cheap funding for federal programmes. It capped yields by means of financial repression. The aggregate price level rose by 50pc over five years. It was a haircut for creditors.

Ultimately the bond vigilantes may cease to believe assurances that inflation is under control and take matters into their own hands, imposing monetary tightening on a reluctant Fed. Rather than a taper tantrum, it would be a data tantrum.

Why do we have independent central banks? It’s not a perfect solution, certainly. But the base argument is that people don’t trust politicians with the money supply and inflation. That – valid to my mind but what I think isn’t the point here, it’s what everyone else things – uncertainty about whether politicians will rein in their spending if inflation rises, to put it in MMT terms, means that interest rates are always higher, thus growth lower, than it could be.

Stick believable central bankers in there, who will manage things technocratically, not politically, and that interest rate premium reduces.

The P³ insists that central banks should not be independent so that politicians can act democratically with the money supply and inflation.

D’ye see the problem here?

Well, no, not really

Banks should be under a legal duty to prevent fraud, said a crime commission, in an extension of duty of care laws.

How expensive do we think banking would become?

The commission – set up by the police foundation, a think tank – said the principle had already been established with the government’s proposed statutory duty of care on social media firms requiring them to protect children from online harms like child abuse, suicide and self-harm.

“It is worth considering whether this duty of care ought to be extended beyond the social media companies to other industries, for example financial services, to prevent fraud and other forms of economic crime,” said the commission in its interim report published on Wednesday.

Banks must monitor every transactions, see who is spending what on what? Rilly?

Plus, of course, there’s no evidence that it would reduce the amount of fraud. Thinking they’re fully protected people might take even less care than they do now…..

Not in the slightest a surprise

NatWest will move its headquarters out of Scotland after 294 years if the country becomes independent, chief executive Alison Rose has said.

Ms Rose said the bailed-out bank would be forced to act because it is simply too big for the Scottish economy to support. The lender – which last year changed its name from Royal Bank of Scotland – holds around £770bn of assets, almost five times Scotland’s GDP.

Scotland in the euro would change that. But an independent Scotland with its own currency? Just too big an organisation, too big a balance sheet.

No, not really Paul

The failure of Greensill Capital will cost UK taxpayers up to £5bn, a parliamentary inquiry has heard, as one expert said the lender’s business model was “as close to fraud as you could imagine”.

The former City minister Paul Myners said the government could end up footing the bill of unpaid state-backed loans and social support for thousands of steelworkers whose jobs are currently at risk at one of Greensill’s largest borrowers, Liberty Steel, owned by metals magnate Sanjeev Gupta.

That’s a cost of the failure of Liberty Steel, not of Greensill.

It’s amazing what you can get patents on these days

Greensill managed to last two years longer than the Vice Chairman’s patent:

Supply chain financing system and method
Patent number: 6167385
Abstract: A method for financing a supply of goods (a supply chain) from a supplier to a buyer in which the buyer has a lower cost of funds than the supplier. According to the method, the buyer generates a purchase order for the goods which is forwarded to the supplier who in turn ships the goods to the buyer. The supplier sends an invoice to the buyer which stores the invoice data in a database. The financing institution electronically accesses the database to retrieve the daily invoices. The financial institution then calculates the financing applicable to the shipped good and forwards a payment to the supplier. Upon maturity of the financing, the buyer settles with the financial institution by remitting the gross proceeds.
Type: Grant
Filed: November 30, 1998
Date of Patent: December 26, 2000
Assignee: The Chase Manhattan Bank
Inventor: William Roland Hartley-Urquhart

Well, you can see why they were fired really……

Credit Suisse Group AG amassed more than $20 billion of exposure to investments related to Archegos Capital Management, but the bank struggled to monitor them before the fund was forced to liquidate many of its large positions, according to people familiar with the matter.

The U.S. family investment firm’s bets on a collection of stocks swelled in the lead-up to its March collapse, but parts of the investment bank hadn’t fully implemented systems to keep pace with Archegos’s fast growth, the people said.

Credit Suisse Chief Executive Thomas Gottstein, and Chief Risk Officer Lara Warner, who recently departed the bank, only became aware of the bank’s exposure to Archegos in the days leading up to the forced liquidation of the fund, people familiar with the bank said. Neither Mr. Gottstein nor Ms. Warner had been aware of the fund as a major client before that, these people said.

Not actually aware of a $20 billion risk position……

Someone might go to jail for this

Trying to organise a corner in a commodities market?

From a PR email:

After Gamestop and Wall Street Bets was all over the news, I joined the spin-off Reddit community called Wall Street Silver.
Wow, I can’t believe what I discovered… In about five weeks, they have already 60,000 members and it is growing at exponential speed. The members are literally buying up all the Silver they can find on the market, and have created a significant shortage to the Silver market.

Retailers worldwide have been running out of silver. Call any bullion retailer and ask them, they are all running out of Silver and there is no relief in sight. One major retailer has reported a 5,000%+ jump in sales. It is reminiscent of the early days of Covid when stores were running out of hand sanitizer, paper towels, etc..

These millennials are committed to cornering the market on Silver.

They created a YouTube Channel and are interviewing legendary investors including Jim Rogers, Marc Faber and David Tice.

They call themselves “Silverbacks” (after the gorilla) and compete with each other posting pictures of their Silver. They call their collection “stacks” and themselves “stackers”.

Please let me know if you are interested in developing this news piece.
I can do these two things to help you:
— Send you the press kit
— Arrange an interview with Ivan Bayoukhi, the founder of this Reddit group

The Hunt Brothers also come to mind. Trying to corner a commodity is a lot, lot, harder than a stock…..

I don’t wish to be rude here

How much do looks matter? How much should they?

Here we have the latest outsider attempting to storm the bastions of capitalism.

That he looks like an ocker too dim to avoid the pub with no beer should have been a clue? Or not?