Finance

The Department of Justice is investigating Polymarket for allegedly allowing US-based users to bet on the site, Bloomberg News reported on Wednesday evening.

And that’s one of thoise things that I think is near certain to have happened. Polymarket doesn;t have the right licences to accept US bets. It’s right on hte verge of getting them but activity in hte past few months would breach those rules. Sure, you can check IPs, addresses, all saorts of stuff. Know your customer rules and all that. But those will never work perfectly. Spoofing not being in the US is easy enough.

So, if they want to say “You allowed a USian to bet, you’re knicked” they almost certainly – to my mind – can. If they want to say “Well, how hard did you try to stop them?” that would be fair and something possible to defend against.

As to why they’re shoutiing now, sure, could be politics. But there’s also that fact that bureaucracies can be and often are hugely vindictive.

Varied lefties – especially MMT types – get very shriekie when you use the household analogy for government finances. Yet, at a certain level, it’s a perfectly good analogy:

Budget 2024: Borrowing costs surge after Reeves plots debt-fuelled spending spree

Sure and anyone can get a bit of freebie credit out of suppliers. Overdrafts cost a bit more, mortgages less than that but you’ve got to have security. And so on – but it is true that as you borrow more then perceived risks rises and you’re paying more for all your borrowing. At some point you’re juggling credit card balances and then comes the prospect of Fred and his lead pipe collection methods.

The yield on 10-year gilts – the return the government promises to pay buyers of its debt – spiked by nine basis points to 4.41pc in the wake of Ms Reeves’s speech, an 11-month high.

Early stages yet but the analogy does hold.

Except, sometimes, they’re not:

Lilium, This Is Perhaps One That Won’t Fly
Mar. 21, 2022

And:

Lilium Didn’t Raise Enough Capital To Take Off
Mar. 09, 2023

And:

A German flying taxi pioneer that was once valued at more than €3bn (£2.5bn) is preparing to file for bankruptcy after officials in Olaf Scholz’s government blocked a cash infusion.

Lilium, which made its first successful flight in 2017, said the bulk of its businesses were unable to pay their debts and that the divisions would file for self-administration, a form of insolvency, as it looks to sell its assets or secure rescue funding.

Many City insiders increasingly believe that the push to regulate banks better after 2008 has gone too far in stamping out healthy risk-taking.

Mr Bresler added: “We’ve seen a lot in consumer duty. I certainly think that maybe outside the US we are held to the highest standard from a regulatory perspective. That is a great thing but also very challenging for businesses like us because the burden is significant.”

The increase in red tape “creates an issue for small businesses because your entry barrier is so high,” Mr Bresler said.

Because the cost of setting up a new bank is so high. Which is weird. Because in all other respects the setting up of a new bank is getting ever cheaper. The internet, there’s off the shelf banking software and all that. We should be seeing an explosion in new banking licences. We’re not….

The FTX bankruptcy. Looks like the Chapter 11 will in fact make a profit. That is, there will be something for shareholders as well as creditors.

No, this doesn’t mean Sam did nothing wrong. It does mean that crypto is well up since the bankruptcy. So they’ve been able to sell the rubble and collect cash to pay people back at the crypto prices of Nov 22.

As, in fact, happened at Mt Gox as well.

Rachel Reeves’s plan to significantly increase borrowing in the Budget risks pushing up mortgage rates, Treasury analysis suggests.

An official modelling exercise indicates that the Chancellor’s plans to rewrite Britain’s fiscal rules could increase the cost of debt for consumers and businesses.

The Treasury research paper warns that a “fiscal loosening” of just one per cent of GDP could lead to a “peak increase in interest rates” of up to 1.25 percentage points.

The document goes on to warn that every increase in annual borrowing of £25 billion could increase interest rates by between 0.5 and 1.25 percentage points.

The actual numbers there, well, mebbe. But the general idea is obviously true. In order to attract mre money – as Spud would say, in order to gain more who wish to save with the government – the rates on offer will have to rise. For the standard supply and demand reasons. If there were more who wanted to lend more at current rates then they’d be doing so and so bidding up prices/down yields. Thus to gain more we need to change the price on offer to move along that demand curve.

Volume on offer and price are not independent of each others…..D’Oh.

What’s actually going to be interesting here is watching who tries to deny this.

The SEIS allows investors to claim reinvestment relief of 50pc when investing the proceeds of a capital gains-liable disposal, in effect cutting the tax bill in half. Gains from the scheme are also exempt from capital gains taxes.

The SEIS was established in 2012 to help stimulate Britain’s start-up economy. Companies that are less than three years old and have fewer than 25 employees can raise up to £250,000 from the SEIS.

Ed Prior, head of investor services at SFC Capital, which runs the UK’s biggest SEIS fund, said investments since the start of July were up 90pc,

And thus the story of vast numbers dodging future CGT rises etc.

at £3.1m compared to £1.6m in the same period a year ago.

Ah.

SFC accounts for around 10pc of all SEIS investments. In total, the scheme invested £157m in 1,815 companies in the 2022-23 tax year.

Fairly trivial in the scheme of things then…but got an article about in the Tele so well done there….

Tech bubble fears grow as Nvidia shares slump

The time to fear a tech bubble is when it’s inflation, not when it pops….

A leading London wine merchant is embroiled in a spat with a US celebrity chef over claims it is refusing to repay cash he ploughed into its investment scheme.

Eddie Gallagher, who hosts a food show on Amazon Prime, claims that the UK merchant Oeno was failing to sell $7,500 (£5,700) worth of wine he owned through the company despite repeated requests to liquidate his account and sell the produce.

The row comes amid a crisis for fine wines after a supply glut sent prices plunging, leaving merchants struggling to offload bottles for their investment clients.

Boom and bust in alternative investments. Ho Hum.

Early in, early out, can work. Late in pretty much never does.

There was a lovely calculation by The Economist some time back. If, on Jan 1 each year, you put your money into the best performing investment of the previous 12 months – then did that again next year etc – then pretty quickly you ended up with 0.01% of the starting sum. If, on Jan 1, you put it into the worst performing of the previous year then soon enough you were richer than the entire world.

Just how booms and busts work.

Global stock markets have plunged amid fears that the US Federal Reserve has left it too late to begin cutting interest rates and risks damaging the world’s largest economy.

Shares tumbled in Asia, with Japan’s Nikkei 225 index closing down 2,216.63 points – its second-largest points drop in history – after weaker than expected US factory data showed output dropped to an eight-month low in July amid a slump in new orders.

So, did they keep rates high enough to causes a proper, deep recession? Or not? And the bet isn’t about that, it’s about what people believe about that. Good luck.

Ashley Reading, left, whose daughter is dating the footballer Scott McTominay, right. There are allegations that some investors’ funds were “used for the purpose of the Reading family”

Undoubtedly such allegations will prove to be wholly and entirely unfounded.

It was an unregulated investment scheme that promoted returns of up to 18 per cent a year

Entirely and wholly.

Fortress’s borrowers included the former agent of Gareth Southgate, the England football team manager, and Kevin Maxwell, son of the late media baron Robert Maxwell.

Absolutely.

Given the “seismic” windfall millennials are set to inherit – £71 trillion in assets in the UK alone, or more than £500,000 apiece for those inheriting from the wealthiest 10pc, according to Knight Frank – the future looks contentious.

Total value of household assets in UK (so, financial wealth, pension pots and property) is around £15 trillion.

Sure, we can mutter about overseas assets and all but really, not that much.

How ‘selfish and entitled’ millennials are capitalising on a £71 trillion goldmine
As baby boomer parents die, a record number of wills are being challenged in the courts

Both subs and the journalist seem to believe it though.

Charlotte Lytton

Tsk.

A stronger banking industry, with greater lending capacity, would help strengthen the economy, make it easier for companies to raise capital, and distribute money to where it was needed around the Continent.

It’s nicely rah rah but there’s no particular logic to it.

The background is let’s have lots of mergers to create megabanks across Europe. Didn;t Fred the Shred already try that?

Y’all y’all will recall the Great Potato declaring that banks simply do not need deposits. They only take them as a favour to customers.

Profits at Lloyds Banking Group fell by more than a quarter in the first three months of the year after Britain’s biggest domestic lender was hit by tougher competition for deposits and mortgages.
….
Its net interest margin, which is the difference between the interest it pays on deposits and charges on loans, fell to 2.95 per cent from 3.22 per cent a year ago, which it blamed on “headwinds due to deposit churn and asset margin compression, particularly in the mortgage book as it refinances in a lower margin environment”.

Net interest margins are a key measure of banks’ profitability and had surged since late 2021 as the Bank of England lifted interest rates to combat inflation. This is because commercial lenders were slower to raise the rates they paid to savers than they had been for their borrowers, boosting their margins and profits but prompting criticism from politicians and regulators that depositors were being treated unfairly.

If banks don;t need deposits then why are they competing for them on price?

“I have absolutely been borrowing more than I previously did, everything costs more and wages are low in rural Alabama,” he says. What affects him the most, he says, is the high interest on his debts.

“If you have to borrow money and can’t get it from a bank, you are going to pay interest rates at 35% and that’s just ridiculous. I took out a loan for $2,000 for 24 months, and I have to pay back over $4,000.”

The Guardian finds those Americans being hammered by high interest rates. Or, perhaps, their own choices.

Evergrande, the world’s most indebted property developer, has been accused of fraudulently inflating its revenues by £62bn.

The China Securities Regulatory Commission said Hui Ka Yan, the founder of property giant Evergrande, “instructed other personnel to falsely inflate” the company’s accounts in 2019 and 2020.

Who is – and quite literally, possibly at least – going to get it in the neck for this? For anyone who thinks this is the only such thing in China’s property industry is dreaming.

Victims of the London Capital & Finance (LCF) scandal have demanded Google pay back tens of millions of pounds that was spent on misleading digital advertising to promote the alleged “Ponzi scheme”.

The High Court heard last week that a marketing agency working on behalf of LCF paid Google more than £20m to promote its financial products.

Many of the 11,500 people who put money into LCF did so after discovering it through Google. LCF, which sold “mini-bonds” to investors, raised more than £237m before it collapsed in 2019.

But if 10% of the funds raised are spent on just one part of the marketing programme then imagine how high the internal rate of return has to be to privide a margin for investors.

Assuming it’s on the up and up in the first place of course.

There’s no real surprise this is being run in The Guardian. They don’t understand enough economics to know that it’s tosh.

The next year, 2011, I placed a bet. It was a bet that the hundreds of billions of pounds of economic stimulus being poured into the UK and US economies would not reach the people who needed it. It would settle in the pockets of the richest, who would use it to buy the homes of the poor, and the economy would never recover. That year, I was Citibank’s most profitable trader in the world. They paid me $2m and asked me to do it again. It was around about then I realised the whole economic system wasn’t working.

That wasn’t a bet, that was a certainty. On the basis that the Fed and the BoE actually announced that they didn’t want that QE cash flowing into the real economy. The entire point and aim wsa that it should sloh around the financial markets. The effect – the desired effect – was to lower long term interest rates and thereby push people out along the risk curve in pursuit of yield.

If they’d actually desired QE to be money that govt then spent into the real economt then they’d have done tens of £ billions of it, not hundreds of £ billions of it. Because – as lockdown QE showed – if you then spend vast waves of newly printed money into the real economy then you trigger inflation.

Traders do not care about the budget, because the budget is not for traders and the budget is not about the economy. The budget is a piece of theatre meant for your consumption. It is a cute moment – a photogenic moment where a multimillionaire can hold up a red box and bribe you with a bit of your money, while they and all the other multimillionaires bankrupt the government with monetary and fiscal stimulus packages that seem somehow to always end up in their own pockets. They then use that money to buy assets such as all the houses that your children will need but never be able to afford to own.

Very Guardian economic analysis, isn’t it?

And the traders, traders like me, we sit in skyscrapers and we laugh. Because we know that Jeremy Hunt and Rishi Sunak, who are multimillionaires just like we are, will never tax us. We know that we will get richer and you will get poorer, and our lives will get better, and yours will get worse year after year after year. And each of us are paid millions of pounds every year to bet on it. To bet on it, instead of telling you.

Very, very, Guardian.

Church of England’s pension fund invests over £30m in water firms despite sewage crisis

Not really, no:

The Church of England’s pension fund has more than £30 million invested in water companies despite the sewage crisis, according to a new documentary.

At some point in the past the Church pensions invested some indeterminate amount of money in het water industry, which is now worth £30 million.

This isn’t the same as has just put £30 million in.

And given that the Church pensions are going to largely reflect the overall market – sensibly – then it’s probably right that they should have been in water.

Further, I’m really pretty sure that the big complaint about water is that the bastard capitalists have been getting all the money. That is right, isn’t it? Which means water is a great place for a Church pension to be invested. Of course, they may not, in fact, have made money in water. But that does mean that the capitalists haven’t been getting all the money.

Dame Siobhain McDonagh, a Labour MP on the Commons’ Treasury select committee, said: “Just before Christmas, Aurelius released a statement saying they would ‘re-energise the business’ and ‘deliver the next chapter of success’. Less than three months later they are putting the brand into liquidation and look like they are first in line to be paid. You have to question their sincerity. Did they ever intend to grow the business?

“The same statement said that The Body Shop has been a pioneer in corporate social responsibility. If they want to live up to that, they had better put their shop and office staff first before paying out to themselves. There are more than 2,000 jobs at risk and I want to see them protected before private equity firms profit from this deal.”

Wages and redundo payments are protected (or whatever the word is – ah, preferential debt) creditors. They get paid first.