Finance

Holy shit

Leon Black, founder and chief executive of private equity giant Apollo Global Management, is stepping aside after a review found he made larger-than-expected payments to the late Jeffrey Epstein.

The billionaire paid Epstein a total of $158m (£116m) in fees for advice on trust and estate tax planning in the five years to 2017, according to a report by law firm Dechert. This is much more than was previously known.

The amount was “intended to be proportional to the value provided”, according to the report, which added that Mr Black believed Epstein’s advice – vetted by outside lawyers – was worth as much as $2bn in value.

What value was Epstein providing that Deloitte’s wouldn’t?

Holy Shiiii

PIs are paid according to a formula based on the aggregate level of funds placed with the platform by their copiers. The stars are paid up to 2.5 per cent of those assets — payments that can amount to hundreds of thousands of dollars per year.

This is on one of the “investment platforms”. Trade your own portfolio. Then, as people copy you – making you a PI – you get a slice of their money.

There’s no way at all the platform is making 2.5% of those funds invested. So where’s the money coming from?

Plus, obviously, how does one attract $100 million to copy ones’ trades?

Bloody idiot

There may be a reason Ollie Kamm moved from being a hedgie to journalism:

Recent experience shows there is no shortage of demand for UK government debt even at historically low interest rates.

If that’s true then why does the Bank of England own 40% of all issuance, £800 billion’s worth, plus absolutely all new issuance?

Jeebus, we can’t be talking about market demand for something from a manipulated price now, can we?

A useful sign of financial skullduggery

Bank of England governor Andrew Bailey has apologised for his role in the demise of London Capital & Finance, the investment firm that collapsed owing customers almost £240m.

OK, LCF, 8% returns on minibonds, it goes bust, old, old story. So old Adam Smith warns against it, those willing to pay really high interest rates are those you don’t want to be lending to.

But this is a grand, screaming, red neon, warning sign:

A marketing agency, Surge, was used to approve LCF promotions and help it attract new investors. Surge received a 25pc commission for each customer it signed up.

Assuming the Telegraph has that number right – arts graduates and numbers etc – then that’s actually all we need to know it’s a scam. For it means that the money invested has to make a 33% return – assuming a one year term – before it even breaks even, let alone pays 8% interest. Which isn’t one of those things that happens really……

Any American readers members of Robin Hood?

I want to have sight of their “leaderboard”. The stocks that are being traded most across their membership.

I can’t gain an account from here in Europe.

So, anyone a member and can screen shot it for me or summat?

If I then want to go ahead and have permanent access then I can organise that but it’s a bit complex.

The purpose of this is that “RobinTrack” is now closed down. So, I want some other manner of finding out what the day traders and the like are excited about now.

You what?

That peculiar characteristic of Britain’s investment environment is its obsession with income.

This obsession starts with individuals and organisations such as pension funds and charities – the clients of fund management firms – and transmits itself to those firms, which are for the most part the actual owners of the shares of British businesses.

Part of the firms’ response is to launch large numbers of income funds, which then need to find large numbers of firms that pay good dividends in which to invest their clients’ money.

The result is that many of this country’s listed companies feel pressure from their investors to use a lot of their profits to pay dividends. If they know that this is what their suppliers of capital want, they will be inclined to give it to them.

People doing what peeps want is a bad idea? Eh?

The largest portion of national capital is in fact those pensions. Which exist to provide an income for pensioners. The national capital producing an income is thus a bad idea?

Eh?

One thing they don’t say

Revenues also rose 6pc to $10.5bn in 2019, as its terminals business added 2,000 more users, the analysts found. That came despite the percentage of revenues from terminals dropping from 85.2pc to 72.4pc over the period.

The average price of a financial terminal rose by 2.4pc to $1,968, according to Burton-Taylor, with the number of terminals climbing from 265,000 to 332,550 over the past decade.

That’s for a Bloomberg terminal. Crank through those numbers – revenue, times percentage from terminals, divide by number of users – and it’s $2,000 a month, not a year.

Which is, quite clearly, the result of market power and excess profits. But no one does go out there and demand regulation, break up, as they do with Google, Facebook and the rest. Can’t be because Mike himself is a good little cultural lefty, can it?

Two outta three

The biggest doubt is whether Mr Erdogan will allow orthodox economic policies and a rise in interest rates – something he has described as the “mother of all evil” – to help fix deeprooted problems. Turkey’s economy has struggled in recent years to cope with rampant inflation, a overinflated credit boom and the currency’s 65pc collapse versus the dollar since 2015.

Inflation, interest rates, FX.

Well, yes, but is this entirely relevant?

That crooks don;t sell financial advice seems fair enough. But what type of crook?

In what is believed to be the first time it has exercised its powers in cases of this kind, the Financial Conduct Authority (FCA) barred Frank Cochran, Russell David Jameson and Mark Horsey after they failed its “fit and proper” test for regulated professionals.

The three were convicted in 2018 of unrelated sex offences committed while they were working in the financial sector.

Cochran, who once gave financial advice to actors, musicians and athletes, was sentenced to seven years in prison after being convicted of offences including sexual assault, engaging in controlling and coercive behaviour.

The disgraced financier, who used to hire corporate seats at the British Grand Prix and the Badminton Horse Trials once partnered his firm, Celebrity Financial Planning, with Wolverhampton Wanderers football club.

Mark Steward, the FCA’s executive director of enforcement, said: “The FCA expects high standards of character, probity and fitness and properness from those who operate in the financial services industry and will take action to ensure these standards are maintained.”

Jameson, a financial adviser, was banned after being convicted and sentenced to five years in prison for criminal offences relating to the making, possession and distribution of indecent images of children, which the FCA said included “films and images of the utmost severity”.

Horsey, who ran his own firm, was convicted of voyeurism for surreptitiously observing his tenant having a shower and making video recordings.

What is the relevance of kiddie fiddling to being able to recommend shares?

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?