Thursday, December 18, 2008

Banking revisited - real value

Since Christine Lagarde, the French minister of economy and finance, expressed officially in the early days of November 2008, that nobody could have imagined three months earlier that such a mess would pop up from anywhere, I’ve been nagged by more questions than I could manage to find the answers for.

The ordinary thinking goes like this: if a person like Mr Alan Greenspan or Mme Christine Lagarde says a thing there is no way to suppose the contrary. But if the thinking is not that ordinary ? If we are all extraordinary with the exception of the bankers who just need same Microsoft patch to see things better.
Abuse of a position could be a simplified response to the void statements by both of the above mentioned luminaries.

If only somebody could give me a helping hand in finding any responses to the questions that blur my thinking.
Are they blind to evidences thrown into their faces?
Are they convinced that the rest the folk is not allowed to imagine a different scenario ?
Don’t they manage seeing large enough to spot the black spots on the white snow ?
And many, many other questions that you may ask yourself.

Victor Niederhoffer in his “Practical Speculation” (2003) explains why he and his team say such awful things about Fed Chairman Alan Greenspan. Now it’s up to you to digest his straight and unambiguous remark about Mr Alan Greenspan “ … as an old-hearted, destructive villain who caused the 2000-2001 market crash.”
Hmm … , I like that one especially as it was WRITTEN a couple of years ago and all what Victor Niederhoffer says in his book is of an acute and poignant validity to the present.

Charles Schwab interviewed by Goeff Colvin (C-SUITE STRATEGIES , December 22, 2008, Fortune ) with regard to Wall Street firms says “ … somebody’s hands should be slapped, frankly.” By no means is Mr Alan Greenspan targeted by that remark, but what he says about the recent piling on Mr Alan Greespan is far from “Glory, Glory Alleluia”.

It concerns as well Mme Christine Lagarde and a full wagon of others who abuse the position attributed to them by us. We must be as bad voters as they are managers.
“I don’t think that he watched television, but every day you could see those adds offering mortgages at a teaser rate, 2 %, no tax, returns required , no down payments required, no this, no that, no everything. That was there on television every day through 2004, 2005, 2006, and 2007. It was unbelievable. Right in the face of our regulatory people. What were they doing ? ”, says Charles Schwab.

What I may say is that you could read about the very real danger looming behind the mortgage speculation on the pages of the Fortune Magazine already some four years ago.
Even if neither Greenspan nor Lagarde read the printed paper, what were their close collaborators doing then. I’m afraid they are vociferating their “leaders” who become less ours and who were proved to become an inadequate choice for our policies. Perhaps it’s easy to spill it out like that but a common citizen is paying the price.
Having the markets that are supposed to be competitive, fair and transparent (three pillars) doesn’t work anymore and giving it the third or forth chance to prove itself makes less sense nowadays if the catastrophe is to be avoided.

For years we hear about these three pillars of our economy and our minds start developing an aversion towards these empty phraseology.

As Ken Griffin (Citadel under siege, December 22, 2008, Fortune) reminds us through Hamlet quote that you could’ve learned during the secondary school classes:
“There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.”
Make that phrase a morning prayer for all finances actors. Perhaps it’s the imagination that they miss. I let the others appreciate their pertinence to what they preach.
“With banks promoting real value and long term growth” is what Sheila Bair advocates (Making sense of the madness, December 22, 2008, Fortune).

But what we really forget is that banks should stay rather utility and service companies and let the aerospace, electronics, building, research, education and all of the others not listed here, all but by no means the Banks, to create a real value.

Tuesday, October 28, 2008

Like a Monument

I could’ve never imagined that a monument could be shocked by an event that is of a human nature. The Greek columns survive even an earthquake to last until today. So I must suppose that Mr Alan Greenspan is not a monument. At least not the one as sung by Johnny Cash in his famous tune “The Baron”.

On the Bing Blog “Mr. Greenspan is shocked! Shocked!” I read what I expected someone would have the courage to write about.
Was he really shocked or was it just a theatrical performance seeking compassion from the general public and a dwindling number of his followers.
He just preserved a composed face and managed not to weep like a crocodile or like the president Richard Nixon when he was impeached.

For about twenty years he ruled like a magician of Oz. It makes five US presidential time spans. With a touch of a straw like stick Mr Greenspan regulated the course of the steel & concrete rolling power engine of the American super powerhouse. But that power engine colossus, even after losing its empty financial trunks, will go on even without any of them: the empty trunks or that magic wand.

Will Mr Greenspan fade away into the void world of non insignificance replaced by some others? He missed the chance to be venerated as the genius & hero of the financial stability. Who will beat him now?

He presumably expressed some doubts about his own being right or wrong just before leaving the post. He must've been scarred about the looming danger that was to be materialized three years later. Sometimes it’s hard to be a man (not a woman as sung by Tammy Wynette) who's led the economy of the whole world out if its sane track. For what we achieved now is worse than the internet & telecom bubble implosion combined with the Enron catastrophe. No doubt, America will overcome even that, but Mr Ben Bernanke, Mr Greenspan’s successor, will be kept very busy for a moment. I wish he succeeds and I wish he becomes a new colossus of the financial world such as we expect him to be. I wish I could forget about that Great Illusion that is to haunt me after so many years of that fictional financial progress.

What bothers me even more is that the noble profession of the accountants made it clear at least four years ago that the infamous financial “System” is destined to collapse. Some articles backing the danger of an eventual hard stop were already presented on the pages of the Fortune magazine.

Now as Mr Hank Paulson said, they have worked for one hard week to achieve what was not even achievable through a two years’ period time of a normal job.
I just wonder what kind of a job it is, where you can squeeze two years’ period into one week time.

Tuesday, October 21, 2008

Keep a nasty photo for even nastier circumstances.

Excuse me for posting a crow with that nasty eye. I just couldn’t find a more appropriate image for that occasion.
The photo of the crow was taken by my son while strolling through Montsouris Park in Paris.
Being a regular reader of Jon Taplin’s blog I reread once more the article from October 18, 2008 “Farewell, F**k Off and Pass the Bong” in the light of an event announced in today’s (October 20) on BBC and French TV 2 information media: “Troubled French bank boss resigns”.
In his blog, Jon Taplin cited an article from The Financial Times “Letter: Andrew Lahde, Lahde Capital Management” so I went to the source to check on it.
In his letter Andrew Lahde, the hedge fund manager says:
“I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behaviour supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades.”

The game is the stock exchange and, as it happens in every casino game, where there is a loser there must be a winner.

Our monetary system is collapsing and with it it’s dragging our economy towards a recession. As we hear only about the losers, ourselves included, it’s nice to hear that Andrew Lahde is one of some chosen winners that nobody wants to talk about. In this poker game he bet the opposite to AIG, Bear Stearns and Lehman Brothers.

I would suggest adding to the losers’ list at least two French Banks that lost in the game in a very transparent and neck breaking way. I wouldn’t dare to propose that if not of the grey mice from Montsouris Park in Paris that wished I did it for them.

The first candidate is a French bank la Société Générale (SocGen) with a loss of 5 billions Euros betting 50 billions Euros (more than the total value of the bank) and losing through the gamble just 10 percent: 5 billions Euros. Just to remind you that a trader Jérôme Kerviel was supposed to be behind that losing gamble.
The second candidate is a French mutual bank, Banque Populaire whose chairman Charles Milhaud accepted a full responsibility for the lost cash of 600 millions Euros through a "trading incident" (from BBC).

As no trader’s name (casino gambler) has been mentioned a bulk of responsibility was pushed towards “the exceptional volatility of the markets”. A nice trick for the street people, isn’t it?
For those who do not gamble on stock exchange a tiny note of explanation is necessary.

Volatility means an important and frequent change in the price of a banana juice.

What media do not say is that without that volatility the stock exchange would lose its “raison d’être”. With no risk at stake gamblers would never bet and go for another planet.
So, the argument of a “volatility” is no more an argument but a blurring of a financial chaos.

If I presume that the loss of 600 millions Euros is just a 10 per cent of the total value gambled, it gives 6 billions put on the table.
It must be close to the total value of the bank. Excuse if I’m slightly wrong. Just to give an idea.
Gambling the total value of a bank resembles an epidemic disease on the French soil.
By the way, with all my imagination at stake I can’t see how the boss of Banque Populaire, Charles Milhaud, could be responsible in the way described by his communiqué.

A more viable justification came to my mind while cleaning my kitchen’s oven when a cake got totally burnt inside of it. The attention of my wife was deviated by a TV show, and she was of right to forget about that damned cake. The TV set was not in the kitchen.
Let’s come back to the boss of Banque Populaire now. I suppose the chieftain was simply not where he was expected to be.
By the way, didn’t you see him over there?

Thursday, October 16, 2008

Phlox & Flock

Phlox is a flower that Tadeusz, my father living in Wałbrzych (Poland), showed me during my summer holidays in 2008. It's been flourishing in his magnificent garden then.
Later on, in autumn this same year, while chatting about plants with a gardener of Montsouris Park in Paris, I recognized the same flower that decorated her plantation parcel.
That helped me to label all the photos of that plant that I took recently.
While checking the flower through Google and Wikipedia I misspelled the word "Phlox" for "Flock" and thus I stumbled upon the latest breed of the Netscape Navigator: the "Flock".
I'm still using Netscape version 7.2 for fast web page editing while swapping between three languages that I use on everyday basis.
Flock navigator, being a very socializing browser, attracted me to the point that I opened Google's Blogger just to see how it works smoothly.
My first Blogger posting is the result of that satisfactory Flock test and the Flox was just an innocent starter.

Now when even the trees whisper about that financial nightmare ignited by the prolonged accumulation of the banker’s incompetence, the bare fact that there are nice Flox & Flock is a good piece of money.