Finance

Who recommends what?

Some cash is turning up. No, I am not going to be wildly stock trading. I’ve written about stocks for a couple of decades now and my hit rate is not that great. A few, proper, conviction trades have worked. But no, I am not about to be playing with junior miners and the like.

So, boring dividend stocks, capital making an income. Fags, booze, life assurance companies, that sort of stuff.

But, I need a platform to do this on. IB seems to be much more for traders looking for leverage. Schwab maybe? US and UK would make sense to me – don’t know enough about Europe to get involved. And slightly worried about that US thing of interest and dividends paying 30% withholding.

But, which platform then?

Best would be to have US, UK and Oz (for the occasional junior miner) on the one account. And maybe Jersey etc?

It is shaping up to be a decent summer for savers as fierce competition among providers pushes up interest rates and increases choice.

You can currently get instant- and easy-access accounts that pay up to 5% interest, and fixed-rate savings bonds that pay almost that much. Meanwhile, those looking for a regular savings account can now get up to 8%.

According to Spud none of these people need to offer anything at all in interest. For they don;t do anything with the deposits. They’re not lent out, they don’t finance their loan book, nowt. It’s just a nice service they offer to people and then they pay you for using their service.

However do they make money then? What do they use deposits for? All very much a mystery, eh?

Italian police have dismantled an underground bank used by drug traffickers through which several hundred million euros are believed to have moved over at least three years.

The clandestine bank, whose logistical base was located in Prato, north-west of Florence, has been run since 2021 by a Chinese national, officials said.

The operation acted as a “global broker at the service of organised crime, offering secure channels for paying for huge drug consignments without any physical movement of cash and guaranteeing total anonymity of financial flows”, police said on Monday in a statement.

A bank that really did work the way MMT says a bank works. Just a set of ledgers and you simply move the money around in them.

The reason all banks don’t work like MMT is that all other banks interact with each other and the wider world.

We could also employ Brad Delong’s test. If you borrow short and lend long then you’re a bank. If you don’t borrow short and lend long then you’re not a bank. This isn’t a bank. Which is why it can act as MMT says banks do…..

The peace deal agreed between Iran and the US is sending a wave of relief through the markets today.

Oil has tumbled 4%,

4%, on something generally as volatile as oil, is not exactly tumbled. But, you know…..

The closer you look at the SpaceX IPO, the more it looks like Musk’s ill-fated Doge. It also bears a striking resemblance to Trump’s takeover of the US government.

All of it is arbitrary – based on the hype and will of one man with a giant ego and an insatiable thirst for money and power. It’s built on self-dealing. There’s no accountability. No checks. No balances.

But, but, millions of people are just doing their own thing! Without asking me, without being advised by me, they’re just at liberty to do whatever!

Stop it!

Since then, Carr has approved regulatory requests for Elon Musk’s SpaceX and its Starlink satellite internet – allowing Musk to gain control of two-thirds of all active satellites, more than 10,300, in low Earth orbit, and giving SpaceX dominance over global internet access and defense communications.

See? The administrative state should stop anyone making cheap internet for everywhere! As, in fact, a previous version did – the Federal cash to put internet everywhere deliberately excluded satellite – therefore SpaceX – from contention.

That’s balance, see? Better that no one has it than that the wrong person provide it.

How much money did Elon Musk make in SpaceX’s stock market debut?

None?

There’s now a valuation on some of what he owns. That valuation might be higher than before. But Elon’s not received any more money as a result so “make” isn’t quite right, is it?

They’re self-correcting, see?

Tech stocks have fallen sharply across the globe over fears that valuations of AI companies have surged too high.

Obviously this is not advice in any sense at all:

Cohen said the 1,600 remaining sites would offer eBay a “national network for authentication, intake, fulfilment, and live commerce”.

Those stores could serve as “drop-off and shipping nodes”, and double as broadcasting studios, with eBay providing the goods and customer base for events like livestreamed auctions, it said. “GameStop staff already inspect and grade hardware and trading cards every day. Sellers walk in, items are verified on the spot, and listings carry a trust badge,” GameStop’s slide deck added.

That’s not an obviously insane plan. Which already makes it better than some stock market moves – HP buying Autonomy for example.

GameStop, which has quietly accumulated a 5% stake in eBay,

Of course, could be that really driving the idea.

But what it is is deffo fun.

Allbirds, the maker of minimalist wool sneakers beloved by Silicon Valley, announced on Wednesday that it is leaving shoes behind and pivoting to artificial intelligence. The new focus and rebrand as “NewBird AI” sent the company’s stock up 582% as of mid-day during a flurry of trading.

The surging stock price and new direction is a bizarre, rapid turnaround for a company that had fallen into disrepair in recent years. Once valued at $4bn, Allbirds’ shares had lost 99% of their worth since 2021 and earlier this month the company announced plans for a $39m sale to brand management firm American Exchange Company.

Typical Guardian and finance. It’s nothing, at all, to do with a shoe firm pivoting to AI.

They sold the shoe brand to an investor. They’ve thus got a shell company which is quoted on a major exchange. The shell company raised some more money – $50 million – and that is to be spent upon graphics cards for those who want AI compute time.

Could be a good idea, could be a bad one. But it’s really nothing at all to do with a shoe company doing AI. It’s someone picking up a quoted shell.

Brent crude oil, the international standard, dropped 14.4% to $93.48, and futures for US crude oil sank 14.7% to $96.27 a barrel. The prices remain well above where it was at the start of the war.

WTI is above Brent these days? Long been a fixture in my mind that WTI – export constraints meeting fracking production – is lower than Brent. Even if WTI is, objectively, the lighter, sweeter, oil.

Or is this just The Guardian and prices again?

A leading Wall Street shadow bank has been hit with a surge in withdrawal requests of more than $5bn (£3.8bn) from spooked investors amid warnings of a 2008-style financial meltdown.
Blue Owl Capital said on Thursday it would block some redemptions from two major funds after it was swamped by demands from its financial backers to withdraw their cash.

The reason it’s not the same is that they can – and have – blocked redemptions.

Bank deposits are an “open ended fund”. Turn up, ask for the money back, get it. Deposits are recallable upon demand that is. As a bank must have a deposit to finance a loan this means the bank is bust if deposit withdrawals happen faster than the loans can be called in.

If you can tell people they cannot have their deposit back you are both not a bank and also not subjecty to a bank run. So, no, this is not like 2008. These are “closed end funds” and a closed end fund cannot suffer a run.

Sure, sure, many of those loans could go wrong. But the effect, if they are, is that we watch the capitalists lose money rather than the financial system falls over. It’s not 2008.

A useful test of financial market idiocy is people claiming that it will be the same.

Jeffrey Epstein described Peter Mandelson as “devious” after lobbying a bank to underwrite a mining project launched by their mutual friend Nat Rothschild, emails included in the latest tranche of Epstein files suggest.

That would have been Bumi. Which went wholly tits up in very spectaular fashion. Almost Madoff in fact. On this one specific basis – sure, coal mining in Indonesia is corrupt and political. But we can beat that, benefit from that, right?

Well, not really, no.

In contrast, Mandelson’s tip-off over Brown’s resignation seems to have been sent during market trading hours, meaning it could have been easier for someone with inside information to trade on sterling, government bonds or stocks on the FTSE 100. However, “there’s the risk that the market might not interpret the move in the same way as you did”, Beauchamp noted.

Any reaction is not some objective truth, it’s what everyone thinks about it.

On the day of Mandelson’s apparent tip-off to Epstein, the pound rose by more than two cents to $1.505, before losing all its gains as Brown’s resignation – and his plan for Labour to hold coalition talks with Clegg’s Liberal Democrats – sent shock waves through Westminster. Sterling would gain back a cent a day later, as the Lib Dems struck a deal with the Tories, handing the keys of No 10 to the Conservative leader, David Cameron.

However good your information that was not, shall we say, wholly predictable.

It’s possible to think that Bitcoin is as with gold, given that the politicians ccasnnot mess with it it is therefore a safe asset, a haven in choppy waters.

The rhetoric and price rally helped to fuel Bitcoin’s status among crypto enthusiasts as a “digital gold” – a safe haven during times of uncertainty.

It’s also possibly to think of it as a pure speculation and is thus something that will deflate in hard or uncertain times.

The price of Bitcoin dropped sharply over the weekend to around $77,000 (£56,000) as investors fled the notoriously volatile asset.

We’re coming up on hte 13th anniversary of my declaration that that’s the end of Bitcoin then so I’d not take my view all that seriously. But the above is still the choice of pathways.

Junot came to public attention in 2008 when his business partner, René-Thierry Magon de La Villehuchet, with whom he founded the hedge fund Access International Advisors, was identified as having invested 95 per cent of its assets with the crooked financier Bernie Madoff.

According to someone who knows I’m not welcome on the Telegraph business or finance pages. Someone there doesn’t like me therefore the word is don’t commission Timmy. Can’t imagine why given me sweet and peacable nature but there it is.

Short-sellers aren’t listening, having snapped up the company’s bonds on the cheap in a bet that prices have further to fall.

Perhaps there’s a fatwa against employing anyone – even freelance – who knows fuck all?

Short sellers sell stuff in the expectation that prices will fall and so they can buy back cheaper. No one buys stuff in the expectation that prices will fall further. But here we have, a major newspaper, saying that short sellers buy bonds in the hope and expectation that prices will fall further.

Not employing Timmy is such a wise idea, eh?

The [income tax] U-turn demonstrates a lack of political competence

Well, maybe. Myself I take it to be a simple lack of knowledge. They’ve got to get to grips with the government finances. And they don;t think they need to do that. There are backbenchers – Clive Lewis say – who think just print and spend upon “need” as if he’s been reading Spud. There are backbenchers – Richard Burgon, say – who are deluded into tihnking a wealth tax will pay for everythhng. There are many more who’ve bought into the idea that there used to be austerity so there’s a pot to spend.

The basic truth is still eluding far, far, too many. Sure, you can raise the size of the state, sure you can. But you’ve got to tax someone to do that – because just printing will produce even more inflation than we’ve currently got. Just taxing “the rich” won;t do it. There aren’t enough of them, they’ve not that much money cumulatively, taxing wealth is a really bad idea, they’ll bugger off if you try and doesn’t do that inflation reduction job for the MMTers anyway.

If you want to have a larger state then you’ve got to tax the mass of the people more.

If government cannot – or won’t – get to grips with that basic truth then why would people be happy with the price on offer for lending to that government? The current post-inflation, or real, interest rate is about 1% at present – and who wants to bet that it stays that high, eh?

Shares in Japanese tech investor SoftBank have taken a knock, after it revealed it has sold its stake in chipmaker Nvidia.

SoftBank surprised investors yesterday by revealing it sold its shares in Nvidia last month, raising $5.8bn, to fund its other investments in artificial intelligence pioneers, such as ChatGPT parent OpenAI.

Now, me, I think it’s obvious we’re in a bubble here. The problem with bubbles always being not whether they’ll burst but when – therefore, how long to hold on before cashing in?

So, Softbank does cash in – and for a damn good price look like – and Softbank’s shares fall?

Hmm.

The current state of affairs feels different from 2008, when the crash was caused by the overexposure of banks to the US housing market, and turbocharged by the widespread use of new financial instruments that were supposed to reduce risk but did the opposite.

Everyone in financial markets knows you cannot reduce risk. You can, however, slice and dice it and spread it. Thereby reducing the risk to any one specific position or market participant. That also means that you can concentrate risk in a position to to a particular market participant which may or may not be one of those grand ideas.

Those mortgage pools with the income streams sliced and diced by risk. Worked exactly as they were supposed to. The risk of non-patyment was concentrated into those C tranches – the “equity” tranches. The AAA tranches were supposed to be credit risk free. Because the C, then B., then A etc tranches would all have to go bust first.

This all worked exactly as planned. The C tranches all did fall over. The AAA tranches kept paying out and some of them are even still doing so – tho’ getting to be pretty small now as repayments/remortgages happen.

Risk was spread – that’s why German banks went bust when American mortgages soured – they’d bought C tranches perhaps. You know, spreading that risk?

There was also concentration. No rational bugger wanted to buy thsoe C tranches but given the risk they paid higher rates than it cost to finance them with wholesale money on a bank balance sheet. So, banks loaded up with them. Vast, vast, piles teetering on tiny capital bases. So, when they all went bust – both dispersion and concentration of risk, see – then the banks were, umm, in serious trouble.

Everyone agrees you cannot reduce risk. But you can allocate it. The error was in who piled in to carry that risk, not the slicing and dicing of it. If those C tranches had been in hedge funds, backed by proper capital bases, no GFC. Of course, hedge funds weren’t stupid enough to take that risk but that’s another matter.

Louise Haigh is arguing that the UK should have refinaced all its debt when interest rates were low. This could not have happened. Gilts are not callable, so they could not be called in. Except Consols, which were. So Osborne did call in Consols at par. To refinance with standard gilts. Which will, when they mature be at whatever then interest rates are.

So, what the country actually did was call in 2% (2.75%?) permanent debt to replace with what will next time around be 4 or 5% debt. The actual action taken was wholly the opposite of refinancing the national ebt at lovely low interest rates.

Super, eh?