During the working day I have Bloomberg TV on most of the time in the background. I pick up a lot of themes and newsflow from the station and occasionally flick across to BBC, Sky News, CNBC and even Russia Today where a certain Max Keiser livens up the debates of the day.
Today Max commented on the regulatory scandal at MF Global claiming that it could get bigger than the Lehman’s debacle. Who knows? But the disappearance of client assets on a grand scale just confirms my view that government guarantees, bailouts, FSCS assistance, professional indemnities and all other types of guarantees are pretty worthless and useless at the end of the day. Just tell the pensioners at Equitable Life that the regulatory system designed to protect them is working. I doubt anyone with any sense of proportion could possibly agree that there has been some equitable fair play here.
Max and his colleague, Stacey Herbert then went on to comment on Virgin Money’s acquisition of the ‘good’ part of Northern Rock from the Treasury. Virgin paid £747m ( a jumbo jet amount Mr Branson!) for the ‘good bank’ leaving the tax payer holding the ‘bad bank’ equating to around £21billion (of indebtedness). Interestingly the acquisition sum was approximately a shortfall of £653m against what the taxpayer effectively paid for Northern Rock.
Most financial commentators have concluded that loan books for non-derivative based businesses have appreciated since the depths of the credit crunch so there’s a curious question mark as to how Mr Branson achieved what on the face of it is a privileged discount purchase. Politically it contradicts what Labour & the ConLib coalition have previously said about taxpayers retrieving their investments in these banks.
It seems that the phrase “Too Big To Fail” has been replaced by “Too Easy To Buy”. This trend of high profile people acquiring businesses at attractive levels is not, however, confined to UK. In USA Warren Buffett has achieved similar purchases and has indicated a desire to acquire more businesses. Presumably like Mr Branson there will be deals struck at the highest level and certain squid like bankers will support these deals.
What is concerning I think with the VirginMoney/Northern Rock deal is the total lack of financial SUITABILITY here. The FSA seem to have ignored their own rules here for (“fat”) FEES by the looks of it. I haven’t heard that there have been bus loads of bankers lining up for this ‘good’ bank customer base and yet an airline operator apparently is somehow more than suitable. What a deal for the man from Holland Park!
I’m surprised that Max Keiser didn’t say to his colleague, Stacey Herbert….”The lady doth protest too much, methinks”. What a missed opportunity Max!
The regular impressive earnings numbers coming out of US big business combined with dividend payouts and the phrase “cash generative” lends support to the lie that ALL businesses are …”doing well”. This seems to be the thinking behind most market reflections on Bloomberg. It’s easier for Producers and Editors to project the feelgood factor than project reality. These stations and newspapers rely on advertising revenues from the very businesses that are …”doing well” presumably at the expense of consumers everywhere. Now this does explain to a degree why there are people protesting everywhere.
As we all know there are millions of people operating SME’s/small partnerships and self-employed fighting to stay alive. “Most businesses” in the smaller arena are actually struggling. The AIM index suggests that those listed have had their share prices decline -76% since the all time high achieved in Feb 1999. Since the pre-credit crunch high on 30th April 2006 AIM stocks declined -46% and since the high this year on 1st February the AIM index has declined -30%. None of these statistics imply either that there is a healthy exchange nor indeed a healthy economy especially for smaller businesses. The same trend is apparent in all western economies which again explains why people are protesting.
Could this be the real reason why VirginMoney has been given the green light on Northern Rock I wonder? Come on Mr Branson put some spice into the UK SME’s although I have a horrible feeling that a sale of VirginMoney could be just around the corner. Or even a float for VirginMoney although after Mr Branson’s last attempt at a City float in the ’80s he may decline the invitation.
“Small firms’ £6bn bill for red tape” was just one headline in the DM last week. Plenty of external consultants are soaking this up as a result of new legislation. This is great for small bands of consultants but very bad for the investment community, especially shareholders. The article goes on to say….”Research by the Forum of Private Business FPB reveals that almost a third of the £16.8bn annual red tape (so the headline was only a partial truth in itself) bill borne by small and medium-sized enterprises consists of consultants fees…..Red tape, compliance costs, incl steep consultancy fees, are hindering job creation and, by extension, economic growth. Unlike larger companies, small firms often have to pay for external consultants.”
Welcome to the real world Forum for Private Business. You are eligible to join ENTERPRISE BRITAIN!
I’ve just heard that $1.2bn of client assets have gone walk about…so much for good compliance! When are people going to realise that all this COMPLIANCE/REGULATION is part of the problem?