Money in the news and how you are going to pay and pay and pay
THIS has to be the best paragraph in any of the newspapers today. The Guardian reports:
Treasury sources said Britain would hit the 0.7% target without an FTT, adding that the European commission’s plans would see individual countries using the extra revenue for deficit reduction rather than development. They added, however, that the UK would not seek to prevent other countries introducing an FTT if they wanted to do so.
It’s all about the financial transactions tax, that Robin Hood tax thing. The idea being floated at the moment (‘coz Bill Gates supports it) is that in comes the FTT, then the money is used to provide aid to poor countries. Or, as the European countries are suggesting, to prop up the shaky finances of the European countries.
“EUROPE’S leaders should have paid more attention to the distress of ordinary Greeks and less to the distress of well-heeled European bankers. Rather than trying to punish the “profligate,” they should have thought about the consequences of condemning Greece to years of negative growth, soaring unemployment and rising taxes with nothing promised in return except that maybe, a decade from now, its ratio of debt to gross domestic product might get back down to the problematic levels of 2008-9.”
So says the The New York Times.
An opinion most could agree with:
As the The New York Times Comment says in its punchline paragraph:
“Chancellor Angela Merkel of Germany, President Nicolas Sarkozy of France and others are now rushing to blame the Greeks for the summit package’s rapid unravelling. They need to take their own full share of responsibility for this crisis — and finally fix it. “
SO. Is France alls et to follow Greece? Well, no, obviously it’s not going to be France going bust next: we’ve Spain Italy and Portugal to get through first. But the markets are moving to the point where France might well start to look like it’s in trouble.
Yields on French 10-year government bonds just exploded, now up over 6% on the day to 3.14%.
The spread between French 10-year bonds and German bunds is up even more dramatically — more than 10 bps or a full 9% on the day.
You need another little bit of information to understand this:
Casualty of “market conditions” on Wednesday – the EFSF’s latest bond issue.
The EFSF had mandated Barclays Capital, Credit Agricole and JP Morgan on Monday to price off a ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche, due in November.
And it really could happen too. No, not because they lost all our money playing silly buggers with houses and the like, not because they’ve been lending money to Southern European spivs.
Rather, a company called MF Global has just gone bust. Used to be part of the Man Group (same people who brought us the Man Booker prize for books) but was sold off in 2007. Not exactly a really sexy company, it was a futures broker more than anything else. Basically ye people who took your phone order and went and did the actual trade for you if you wanted to lose your money in pork bellies and the like.
They brought in the ex-head of Goldman Sachs (and then Senator and Governor of New Jersey), a bloke called John Corzine, who decided to make it a much more sexy company. Instead of just processing orders for other people and taking a few cents on each, they’d start playing in futures with their own money and make fortunes!
IT’S very difficult to make money on the stock market: most fund managers don’t even manage to bet the general rise (or fall) in the main markets themselves. And if those peeps making £hundreds of thousands a year can’t do it, why would we think that we would be able to do it?
The answer lies in the information edge. If you know something that the rest of the market doesn’t then you can make money: if you don’t have that extra knowledge then you can only make money through pure blind luck. And today I’m going to give you one of those pieces of extra knowledge:
If the Proshares are underperforming, there’s a simple arbitrage here. Take the ‘Ultras’, which offer 2x leverage, and the ‘UltraShorts’, which offer the opposite, -2x exposure. Going short both stocks generates a very low-risk portfolio pair, because on a daily basis when one goes up 1% the other will almost surely go down about 1% by design; the positions will offset each other. But the drift for both is negative, as they burn money. Since ProShares has been very busy adding ETFs, this simulated strategy started with 23 pairs in 2008, and is now up to 45. Below is a graph of the total return to going short all the Ultra and UltraShort pairs offered by Proshares since 2008. I rebalanced every week. The annual return was 14%, and the annualized standard deviation was 12%.
GAIA will be angry with us. But we should still welcome this as good news.
Under current plans, the level of the feed-in tariff is likely to more than halve, from 43p per kWh to 20p. The solar industry says it can broadly live with that level, but some companies warned that schemes to provide disadvantaged communities and households with low-cost power and heating would be the most likely to be scrapped under the changes.
We might want to ask ourselves why, if the solar companies can live with this lower level of subsidy, they’ve been allowed to stick their hands into our wallets for the higher amount. Subsidy should be, after all, only just enough to get things moving, not twice the amount it needs to be.
There’s two things you need to know, over and above the usual background.
That usual background being that Greece owes around €350 billion and there’s no way it can pay it back. So, default it will have to be.
The two things? The first is that banks don’t just sit there and wait for the default. They do what is called “mark to market”, or at least are supposed to, and this means that when a loan or a bond is going sour they write down the value of that bond or loan. In effect, they take the loss they think they can see coming now, rather than waiting for that loss to actually arrive. We’ve seen in recent days that RBS has written their Greek debt down to 50% of face value and so too has Deutsche Bank. We’re pretty sure actually that all of the UK and most of the German banks have done this. We worry a bit that most of the French ones haven’t but that is Sarkozy’s problem, not ours.
SEAN Parker was once the President of Facebook. He’s now very rich and lives in a house so large you can see the curve of the Earth in his TV room. Parker want you to know that life is now all easy. Being stinking rich is hard. He tweets:
“You guys are really attacking me for being the 1%. I was broke and couch surfing just a few years ago… I have a whole new set of problems to deal with now: security, extortion attempts, kidnapping threats, death threats, etc. Life better b4?“
MICHAEL Moore explains the percentages.Piers Morgan wants him to admit that he is more 1% than 99%:
MORGAN: I need you to admit the bleeding obvious. I need you to sit here and say, I’m in the one per cent, because it’s important.
MOORE: Well, I can’t. Because I’m not.
MORGAN: Because the validity of your argument – you are, though.
MOORE: No, I’m not. I’m not.
MORGAN: You’re not in the one per cent?
MOORE: Of course I’m not. How can I be in the one per cent?
MORGAN: Because you’re worth millions.
MOORE: No, that’s not true.
MOORE: I don’t associate myself with those who do well …
ANGELA Merkel tells us that if the euro fails then Europe fails: to which the correct response is Hurrah!
Germany’s chancellor Angela Merkel today warned that the failure of the euro would lead to the fall of Europe as she outlined a plan to bail out Greece’s stricken economy.
However, rather sadly, this isn’t in fact true. If the euro fails it does not mean the failure of Europe, nor even of the European Union. It means just the failure of a particular idea of it. Sadly here can be a matter of taste of course: I’m so eurosceptic I’ve even stood as a UKIP candidate, a position that I’m aware quite a lot of you won’t share.
THE Times’ Danny Forston has news that Sweden has been relocated:
We have it easy, don’t you know. Yes, the Big Six energy companies make big profits. And yes, one in four of us is “fuel poor”. But spare a thought for the poor Swedes. They pay four times what we do, on a cents per kilowatt hour basis, for gas. Electricity in Copenhagen is twice as dear as it is in London.
GOVERNMENTS lie all the time of course for you know that a politician is lying when you see his lips move. However, there are lies and lies: we all know that “Vote for me a it’ll all be fine” is a lie. We might not know that “US poverty is at an all time high” or “Rents are unaffordable for many families” are for they depends upon detailed statistics which are simply too geektastic for most of us to give a shit.
But just as an example, Shelter released a report last week which said that private rents are now unaffordable in 55% of British cities. And, well, sorta, but not in the way it’s being reported. Yes, rents are high, because houses are expensive.
However, what Shelter said is that rents are too high as a percentage of take home pay. What is being reported they said is that rents are too high as a percentage of household income. These are not the same thing at all: take home income is wages after taxes. Household income is wages after taxes plus benefits.
ARE you having good sex with the love vibes at Occupy Wall Street?
Feel the love:
TEXAS is doing well. You can thanks the Meixcan drugs trade:
[E]xperts who have studied the impact of drug money say it is undeniable that in a tough economy, trafficking has helped boost employment and economic growth in the state’s border regions, from the Rio Grande Valley to Laredo to El Paso. “It does play a role in the life of many people,” said Jay Garcia, a sociologist at the University of Texas-Pan American in Edinburg who grew up in a migrant farm labor family in Starr County in deep South Texas. Drug money “trickles down to the drivers, the ‘mules,’ the leg breakers, people in all positions.”
It’s supply and demand…
THE European Union has banned free speech. That’s the implication of this little nugget of news:
BRUSSELS—The European Commission is leaning toward proposing a ban on the issuing of sovereign credit ratings for countries in bailout talks, a top official said on Thursday.
“I think it’s legitimate to have a special treatment when a country is in negotiation or is covered by an international solidarity program with the IMF or a European solidarity” program, said Michel Barnier, European internal market commissioner.
Should the commission, the executive arm of the European Union, come to view these sovereign ratings are inappropriate, “we could ban it or suspend the rating for the necessary time frame,” he said. “I am studying this matter very seriously.”
The thing is, you see, a credit rating is only Fitch (or S&P, or Moody’s, or any of the other 40 odd more minor ones) saying “You know, we think these peeps might find it difficult to pay back their debts“.
On the one side everyone seems to agree that we’ve got too few really large banks. We should instead have a lot more but smaller banks so that they’re not too big to fail. Smaller banks, one goes bust, well, shareholders lose their money and the rest of us carry on. If we’ve only a few very large banks then one goes down and the entire financial system collapses into a pile of smoking rubble.
So, more but smaller banks please.
Can’t see anything wrong with that myself.
“I couldn’t believe the bank has no system for picking up such profanity.”
THIS saving the euro thing is decidedly difficult you know. The latest news is that if France does what might be necessary to save it, then France itself might go bust.
The U.S. ratings agency said late on Monday it may slap a negative outlook on France’s Aaa rating in the next three months if the costs for helping bail out banks and other euro zone members stretch its budget too much.
The warning, which sent the risk premium on French government bonds shooting up to a euro lifetime high, came as European Union leaders are preparing measures to protect the region’s financial system from a potential Greek debt default.
So here’s what the problem is. So Greece defaults, lots of banks lose money. Boo Hoo. But then maybe Ireland, Portugal will default? Still just Boo Hoo really. But, and here’s the biggie, this then puts pressure on Spain and Italy and if they default then the entire banking system goes down in flames.
TO Seattle, where a law suit has been filed against Amazon, owners of the IMDB website, for $1,075,000. The plaintiff is an actress: The alleged crime: the website revealed her true age.
IMDB is owned by Amazon. The complaints runs:
The actress, who uses an Americanized stage name to avoid the “cultural disadvantage” of her real Asian name, says that the credit-card interception is the only way the company could have learned her real age. She says IMDb refuses to remove her birth date from her profile and that she has since lost work because “lesser-known 40-year-old actresses are not in demand in the movie business.”
WE’VE a report out today about those two earthquakes that happened in Lancashire a few months back. Seems they really could be linked with that drilling for shale gas around Blackpool:
CONTROVERSIAL gas drilling DID cause Fylde coast earthquakes.
And now energy chiefs have sent a stark warning to shale gas company Cuadrilla Resources – stop the tremors or we will shut you down.
It comes as the company this week held urgent talks with the Department of Energy and Climate Change (DECC) to consider a report into the risk of earthquakes associated with fracking – the process used to extract shale gas from deep beneath the Fylde coast.
The meetings followed the British Geological Survey’s (BGS) conclusion two recent earth tremors felt nearby were most likely to have been caused by fracking.
At which point we’ve an interesting choice to make. There’s lots of gas down there. Lots ‘n’lots of it, enough to power the country for decades. Power the country far more cheaply than building yet more bloody windmills and trying to use solar power in a country famed for rain and cloud cover.
SPERM. Just what do you do with it? Well a report by the Human Fertilisation and Embryology Authority (HFEA), the fertility watchdog, says there is lack of good quality sperm. In a bid to up the harvest, the £250 donors can claim in expenses for loss of earnings – you cannot be paid – may be increased to between £500 and £700. That is not too shabby.
The pastor’s wife may care to keep a chilled spittoon at the bedside:
JOEY quits his job in New York, accompanied by the What Cheer? Brigade is from Providence, RI”
A REPORT out of the US about an investigation into Google’s tax dodging ways.
Google reported an effective tax rate of 18.8 percent in the second quarter, less than half the average combined U.S. and state statutory rate of 39.2 percent.
Something’s going on, obviously. What is actually going on is technically complex but can be, at the risk of losing a bit of detail, explained simply enough. There’s essentially two rules you need to understand.
1) An American company only pays the corporate income tax (what we call corporation tax) on profits it takes back into America. If an American company makes profits in, say, Ghana, the profits stay in Ghana or move anywhere in hte world other than the US, then the US doesn’t tax those profits.
SHELTER has a report out showing how rents are just too damn high.
In the majority of areas, typical rents from private landlords are over a third of the average take-home pay – the widely accepted measure of affordability.
From 1997 to 2007, rents increased at one and a half times the rate of incomes. Recent research by Shelter has also revealed that 38% of families with children who are renting privately have cut down on buying food to pay their rent.
OK, let’s accept their research as it is: what are we going to do about it?