…ROLLING STONES — a challenge to TWIST & SHOUT
Wow what a week!
It’s hard to summarise what’s been happening to capital markets over the last few days but one thing is certain, investor confidence is disappearing by the minute. I’ve had plenty of chats with those clients brave enough to contact their brokers and one thing that is coming out LOUD & CLEAR (please turn up the volume):
You can’t always get what you want….Mr Bernanke (sung with a Deptford accent please)
A Mr B from Wales (his name isn’t Bernanke) rang me earlier in the week and we both concluded that the other Mr B is more interested in trying to control the diseased oak tree rather than focusing on the acorn. Isn’t it just marvelous news that I no longer have to listen to those folk on Bloomberg and BBC entertain us all with notions of “green shoots”? Well it would be except that like millions of people across Europe UK and the good ol’ US of A there are bills to pay and strategies to adopt to allow some safe navigation through what is becoming a heavily fortified and dangerous mine field.
As a broker I’m of the opinion that all and sundry around me are losing the plot but I expect everyone is thinking the same. I heard for the first time a respected strategist mention the dread ‘R’ word last night on B’berg. He suggested that the US is bogged down in REGULATION.
So let’s wind back to pre-1980’s shall we? Yes you’ve guessed it: there was NO regulation and the OLD WORLD ORDER did indeed manage to avoid the pitfalls of Contangos and Arbitrage back then. So the question is what is going wrong in the developed economies.
Well we all know that for the last 50 years the west has outpriced itself. Firstly it was Korea that undercut British shipbuilding, then it was Japan that provided the enterprise with cheap, efficient cars and electrical goods and more recently it has been the BRIC nations that are leading the way.
No-one in the west wants to work anymore and the governments and regulators are kowtowing to this extraordinary lack of will by massaging the welfare systems. Unfortunately the welfare model is BROKEN (just look at the waves of Mexicans crossing the Rio Grande into the southern states and the Africans paddling their way across the Med) and needs to be reworked quickly. But as we all know it’s worse than that. I’ve NOT heard a single politician, broadcaster, banker, regulator or strategist say how it really is on the networks for months now.
Why is it that no-one can understand that economies are driven from the bottom up NOT top down. Yet of course these same people keep mentioning the global economy (when wasn’t there a global economy?) in tandem with emerging markets, frontiers markets and just about everywhere except our own back yard. They understand that the Indian economy, for example, is being driven by the people and yet due to some socialist mindset think that they all have the right to shackle the millions out there in the west who are struggling.
It is rapidly becoming THE NEW WILD WEST here and the riots in London and the ARAB SPRING are not worlds apart as many are being drip fed.
So where do we go from here? I’ve had a long hard think about this since 2007 and it seems to me that we’re all looking at the solutions to our problems the wrong way round. Governments cannot and never can solve these problems. Only the people can and until we get some leadership that stops spinning the kick start regulatory and monetary yarns the west will remain in a trough for years to come.
Here’s my quick fix if anyone from the World Bank/IMF/G20 wants to take a look (fat chance):
- Abolish Income Tax for all earning less than £100,000 US$150,000 Euro 110,000 p.a….let the income flow back into savings and purchases
- Simultaneously increase the top earners tax rates to 70% across all three areas
- Investigate ALL non-domicile status & abandon any investigations on offshore tax havens. Tax all non-domicile people & companies at onshore rates. In fact abandon the notion of tax havens and treat all democratised economies in the west the same way re tax treatments
- Increase Corporation Tax across all 3 zones by 10% firstly harmonising the corporate tax treatments & preventing relocations elsewhere
- Abandon ALL forms of regulation & legislation for individual investors, stockbrokers and focus regulatory attention on BANKS, DERIVATIVES and an OPEN & TRANSPARENT REAL-TIME ACCOUNTING universe
- Let insolvent banks go to the wall and investigate the bank bonus culture and if necessary tax bankers retrospectively. It’s NOT going to be easy but essential if capitalism is to survive as the governments have effectively been running a bonus ponzi scheme since Lehman’s.
Oh yes….& sack Mr. B