Finance

Hmm, well, yes

Now, everywhere I go I encounter a recrudescence of the fallacy of applying “household economics” to the nation at large. Who is going to pay for this spending, people ask.

Well, the answer is: the government, by borrowing at next-to-zero interest rates, and the economic growth that will revive the government’s coffers in due course, just as it did after the second world war.

I think a substantial case can be made that the government defaulted on most of that debt through inflation. Something they can’t do again because they’ve done it to us once.

It would actually be useful if someone could point to a detailed discussion of this. How much of that post WWII debt mountain was in fact massaged down by inflation and inflation alone?

Not wholly and exactly

Although we know there will be those who red this is being true in a wholly and exactly manner:

Firms move €150bn of UK assets to France ahead of Brexit
Banque de France says 31 entities – mainly investment firms – have applied for licences in France, moving €150bn of assets since September

Folks have moved the country of registration of the companies that manage €150 billion of assets to France. They’ve not actually moved €150 billion there. They’ve not sold out of UK stock and bought French. The little company “we’re a registered investment trust limited” has become “we’re a little investment trust SA” with the letterbox in a different city.

Sure, this is obvious, we know it. But there will be people out there complaining about the €150 billion having left the British economy….

A little twee here

Even maiden auntish:

Stockbroker axed for calling his bosses ‘f——‘ incompetents’ sues for £10m

Depends a little on which part of the City – trading floor or boardroom – but complaining about strong language and strong opinions strongly delivered is akin to being shocked by swearing in the Army. To the point that it can indeed be a convenient excuse but not actually something unusual.

To start a conspiracy theory

SoftBank is reportedly sitting on trading gains of about $4bn (£3bn) after a series of colossal bets on equity derivatives by founder Masayoshi Son.

SoftBank has spent $4bn on options premiums focused on individual US technology stocks in the past few months, according to the Financial Times which said the move had helped propel US technology stocks to record highs in recent sessions.

Last week, claims first emerged that SoftBank was the “Nasdaq whale” which was pumping up the US stock market with notional exposure of about $30bn.

By the middle of last week, the US equity market had rallied by around 55pc since March.

Softbank has significant direct holdings in the tech sector of this same market. It’s also large enough that it can move the market – it is indeed a whale.

Softbank has made significant losses in its $100 billion Vision Fund. At least, that’s the impression I get. The next mark to market reporting date for Softbank is the end of September.

So, why not do a little ramping in order to boost that asset valuation in a few week’s time?

This is not a theory, not even an opinion, just a speculation.

This is a new take on the Andorra bank thing

The hustle hinges on the murky section 311, a provision in the US Patriot Act that grants the Treasury Department sweeping powers in relation to any bank in the world, under the guise of protecting the world’s financial system. In 2015, the provision was used against Banca Privada d’Andorra (BPA) on the grounds that it was being used to launder hundreds of millions of dollars on behalf of criminal gangs in Russia, China and Venezuela.

The film outlines how the provision is used as a political weapon to protect US interests and undermine nascent threat – such as Catalan independence. It is a forensic examination of the circumstances surrounding the bank’s closure that attempts to illustrate the scale of America’s global influence and establish the innocence of the Catalan politicians at the centre of the scandal.

Well, yes, OK, Confessions of an Economic Hit Man again.

Except there really were dodgy doin’s. How they relate to Catalan politicoes I have no idea but the base and underlying problem was still there.

Lending to governments

Argentina’s “century bond” didn’t last long, but its rise and fall holds lessons for investors at a time of market optimism despite widespread economic dislocation.

An August restructuring guarantees that foreign creditors will get little more than half of what they were due on $65 billion of debt, including the 100-year bonds the government sold three years ago at the height of a decade long emerging-markets boom.

They call lending to governments “risk free” in the jargon.

My word yes, Will Hutton is an idiot, isn’t he?

In the long run, the tax breaks that fuel the entire industry – offsetting interest payments against tax – need to be phased out. It is a sector that has done more to degrade contemporary capitalism than any other. We need more public companies publicly accountable to shareholders and the public, and less indulgence of the indefensible. Britain should not be putting a Brexit deal at risk to save them.

If interest is taxed at the corporate level then it will become untaxed at the investor. Or, of course, it will be double taxed. How’s Willy going to like the optics of the rentier being untaxed?

Clearly this is wrong, but why?

George Monbiot tells us that:

colonial looting and much of the £30tn bled from India were invested into grand houses and miles of wall: blood money translated into neoclassical architecture.

As all British land and housing added together ain’t worth £30 trillion that’s not where the money went. An as India never did have £30 trillion to steal it wasn’t either. So, where’s the idea come from?

A book review at Al Jazeera. Hmm. A book – or a bit of it – by Utsa Patnaik.

The method is, apparently, something to do with India Council Bills. If you wanted to transfer money to India to buy stuff you paid in gold (or sterling, obvs) in London, the bill was sent, the seller received silver or rupees in India. This means – according to the book – that you were paid out of Indian tax revenues. Thus all exports were stolen.

I think that’s the nub of the argument. Looks a bit handwavey to me to be honest. I have found references to people thinking prices were a bit out of line at times so they sent silver direct instead. Which would seem to indicate that the buyers of goods saw no difference at least.

Just wondering where this idea came from – the theft of £30 trillion – and then, well, what is it that those alleging have got wrong? Any financial historians of the Raj around here?

Stupid

The FTSE 250 business was forced to put out a statement after it emerged that David Daly, 61, had bought 3,912 shares on Monday despite the company being in a closed period.

Frasers Group, owned by Mike Ashley, said that it had “robust procedures in place . . . which were accidentally not followed in this instance”.

The sportswear retailer said that the shares were sold within 15 minutes of their purchase as soon as it came to the company’s attention and that the £156 profit within that timeframe had been donated to charity.

Yes, stupid thing to do. But:

The mistaken share purchase has again raised concerns about corporate governance at Mr Ashley’s business empire and its unorthodox ways of dealing with investors. Shares fell by 6¼p, or 2.15 per cent, to 282¾p.

That’s more stupid.

Errors will happen. It’s how quickly you correct them that matters. And 15 minutes looks pretty good to me.

HaHaHa, Ahahaha

So, the Kodak thing.

The stock is pumped and dumped as a result of the loan from the Feds.

The turbulent trading began on July 27, as news of the loan seeped out. Kodak’s stock opened at $2.13 and closed at $2.62, with 1,645,700 shares traded—more than 20 times the volume of previous days. On July 28, with the word now out officially, the stock opened at $9.63, hit a high of $11.80, and then dropped to $7.94, which was an almost four-fold gain from the start of the previous day, with a whopping 284,666,800 shares traded. The next day, July 29, was crazier. Kodak shares started at $18.43, and at one point reached an eye-popping peak of $60. Its low that day was $17.50, and it closed at $33.20, with 276,020,100 shares in play. But then investors realized that Kodak’s agreement was not yet a done deal, and over the next few days, the stock declined and stabilized in the $15 region.

But it’s damned difficult to do the dumping part. Thin markets, there’s a trouble in trying to move major amounts of stock. Except:

In the middle of this spree, Karfunkel, a major investor in Kodak, and his wife, Renee, donated those 3 million shares to an entity called Congregation Chemdas Yisroel, according to an SEC filing. They did so on July 29, the day the stock price hit $60, so those shares could have been worth as much as $180 million at the time of the gift. If the donation was executed at the end of the trading day, its value would have been $99.6 million. Given that Congregation Chemdas Yisroel is registered as a tax-exempt religious organization, the Karfunkels will be able to claim this donation as a tax deduction. That means they could pocket a deduction between $52.5 million and $180 million for a bloc of stocks that two days earlier was worth $6.39 million.

That’s one way to do it, sell the stuff to Uncle Sam who has to buy in any volume.

That’s pretty cool actually. Yarmulkas tipped to the operator there…..

It’s not corporate Britain you fool

Corporate Britain is cutting its dividend payments. Despite this, the FTSE 100 index of the largest quoted companies is 20 per cent higher than it was on March 23, the day Boris Johnson announced lockdown.

75% of FTSE 100 revenue comes from outside the UK. The FTSE100 is companies listed in London, not companies working in Britain. Some of them have no connection nor business in the UK other than their listing.

But then Ollie Kamm, everything that’s wrong with the establishment view, always.

Information for Snippa

Government borrowing costs are likely to rise when the Bank of England starts unwinding quantitative easing, the chief executive of the Debt Management Office has said in comments that raise questions about the sustainability of Britain’s high national debt.

Sir Robert Stheeman told MPs that once the Bank began selling the gilts it held through QE, “then clearly in terms of the overall market you would have two sellers” and “that probably would have an impact on yields”.

Well, yes, if the BoE’s stock of QE gilts is sold into the market then interest rates will rise.

The usefulness of this information being. We can’t claim that the market wants more gilts – because, look, see, low price! – when the BoE owns £725 billion of them. A distorted market price isn’t a useful guide to supply and demand, d’ye see?

Gee, ya think?

Scandal-hit payments firm Wirecard has said the €1.9bn (£1.7bn) missing from its accounts simply may not exist.

Wirecard’s chief executive quit on Friday as the search for the missing cash hit a dead end in the Philippines.

On Sunday the central bank of Philippines said none of the money appears to have entered the country’s financial system.

The German company also said it was withdrawing its financial results for 2019 and the first quarter of 2020.

“The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist,” the company said in a statement on Monday.

It’s the cumulative gap between what they’ve been reporting as profits/income and what they’re really been making as income/profits. You know, mebbe?

If only there were enough time

Or even, if only someone who really knew about banking regulation were to take them to task at their own seminar:

Webinar invitation: “The virus of financial deregulation” on Wednesday, 10 June 2020, 6-8 pm CEST

Limited places: Register here now!

Dear friends, dear interested,

In the last few weeks, we experienced various attempts to use the Corona Crisis as an excuse in order to weaken financial regulation. In banking supervision we already saw steps towards relaxation of capital requirements and guidance. Further relief is currently in the making in the European legislative process. Consumer protection and financial market regulation are not spared as the EU-Commission is already discussing weakening in these areas, claiming it would support companies to survive the crisis. One gets the impression that the current economic crisis is used as an excuse to roll back important pieces of financial regulation in a rush and without credible evidence that it could actually help the economy. On the contrary, many of the rules at risk of being abolished are lobbied against by the financial business for a long time. We want to shed light on these attempts of regulatory rollback with you in a webinar on Wednesday, June 10 at 6 p.m. and have a discussion with experts, activists and civil society and consumer representatives.

Please register here: Registration

We are excited to welcome Anat R. Admati, professor of Finance and Economics at Stanford University and author of the book Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It for an introductory speech. For an overview of  the quick fix of banking capital rules currently discussed, we are happy to announce Nicolas Véron, senior fellow at Brussels based think tank Bruegel and Peterson Institute for International Economics. Proposed changes to consumer protection and securities markets rules will be introduced by Thierry Philipponnat from FinanceWatch.

For the subsequent panel and discussion with consumer organisations, NGOs and political activists we are more than happy to announce the participation of Guillaume Prache, Managing Director of the European Investor Organisation BetterFinance, Vitor Texeira, advocacy officer on transparency and accountability of the EU Institutions at Transparency International, Molly Scott Cato, professor of Economics and former Green MEP and Myriam Vander Stichele, finance sector and trade expert at the NGO SOMO.

Please note: the webinar will be interpreted in English, German, French, Spanish and Italian.

The interactive online format allows all participants to ask questions and join in the discussion. The discussion is open to all interested parties. The number of participants is limited, so register here.

We are looking forward to discussing with you. Please, share this invitation with anyone interested.

With European green greetings

MEPs in the Economic and Monetary Affairs Committee of the European Parliament:

Sven Giegold (Germany)

Claude Gruffat (France)

Philippe Lamberts (Belgium)

Stasys Jakeliunas (Lithuania)

Kira Peter-Hansen (Denmark)

Ernest Urtasun (Spain)

I’m not going to do it as shouting “Shut up you damned idiots!” might be cathartic but not wholly useful. But perhaps one of our accounting fiends here is in fact up to date on all of this?

Arbitrage!

So, writing up a little stock market piece. I noted that the US, OTC, price of a share was wildly out of line with hte London, AIM, price of that same stock.

Arbitrage!

Then on closer examination that OTC price was the grey market, which isn’t a market at all, it’s simply a record of the last recorded trade price, which might have been weeks, or months, ago. So, no arbitrage.

$100 bills on the floor do exist but not for long.

Which leads to a larger musing. Of course there is arbitrage between, say, ADRs and London stocks. That’s why the prices do move in very near lockstep. The people tasked with creating the ADR itself are asked to move either way, creating or unpicking them, buying or selling at either end, in order to make those prices move in very near lockstep. This happens in large amounts and at very fine margins.

So, what about less liquid stocks? AIM that’s on the Pink Sheets say? It’s possible to imagine – imagine – that the margins are wider here. That’s rather what less liquidity means.

It’s also true that the world is reducing trading margins. Using Transferwise the commission to move $10,000 to £ might be 0.1% with no spread. Robin Hood (and Schwab etc) now have commission free trading.

Which leads to, well, what actually is the price mismatch between such more thinly traded stocks? That will depend upon whether there’s anyone arbitraging institutionally of course. It will also depend upon the details of the nuts and bolts of buying on one exchange and selling upon another. The nitty gritty of proving ownership, of whether it’s actually an ADR and thus some formal change needs to be made to turn it into a London stock, or is it actually the same thing etc.

At which point, well, does anyone know. The real details of these markets?

Err, yes, suppose so

Scandal-hit private hospital firm NMC Health is planning to quit the London Stock Exchange following a two-month share suspension amid chaos over its finances.

Why pay the listing fees if you’re only going to come back to declare bankruptcy. And I don’t particularly see any other result here.