Made off with all our money

"who currently have all the glamour of the Bay City Rollers in the post Shang-a-Lang years"

Good God, Peston !! Are you truly *THAT*old ??

The banks are already weak to the extent that they cannot provide the basic services for which they were set up - they are unable to provide finance to private individuals and businesses.

So how can this make them weaker ?

Isn't it a bit like comparing levels of being dead...this corpse over here has less life in it now.

"Hobbled hedge funds mean weakened banks - which means less credit for us. "

...which means a return to sounder economies !!

So it just goes to prove that you should trust no one when it comes to investing your hard earned cash.

Is there a long queue for gov savings and matresses with zip pockets?

This comment was removed because the moderators found it broke the house rules. Explain.

the market wasn't all that anyway.

My predictions for 2009

out of style and fashion
investment banks
car industry
shopping
showing off

back in style
blogging
talking
reasoning
exercise
listening to music + reading books (bought last year)

I'll not weep for Harry Hedge fund but we can ill afford yet more depression in asset prices.

stop using credit cards as well
that would scare / teach them

Well I'm glad this parasitical 'industry' is going to shrink. Casino capitalism is a zero-sum game. If hedge funds were making money (and clearly many of them were) then other investors were losing it. Peter Mandelson's friends were only able to make obscene amount of money because other, smaller investors (you and I) were losing equal amounts of it.

I think you are seriously underestimating the ability of high quality Hedges to recover and UK PLC. Many have already put risk adverse strategies in place for sometime now, seeking Fund Management status to help find other sources of income to offset redemptions and various other measures.

Banks are weak because blogs like this have convinced everyone they are, share prices have collapse and so has their capital ratios as a result. I hope this blog starts reflecting the real economic situation soon!

Robert, It's all about being overwhelmed by the mystique of financial prowess. These money managers believe what they want to believe: full stop. They are sheep, followers, believers in the magic of the market and the magic of some individuals operating in the market. They lack the knowledge to do their jobs properly because of the 'cult of the manager' which has ruined and is ruining many companies in our economy. You need more than MBA in management to manage well, you need knowledge of your products people and markets. What is obvious is that many of our star money managers have none of these skills.

There was too much debt in the system, and some of it has been lost to investing in overpriced assets like sub prime mortgages , commodities and shares and whole companies that are now reporting lower profits.

Hedge funds are linked to the same principle what can go up can also go down, and since what went up was financed on debt given out on very risky grounds in some case then it is inevitable/

GB needs to realise this, piling on national debt will do nothing but harm. He thinks he is saving the world saying he will not pass on by yet the banks are doing this with small and medium sized businesses despite his best try.

This comment was removed because the moderators found it broke the house rules. Explain.

8,

Cancelled my ONLY credit card yesterday (was always paid off at end of month), the nations largest building society was baffled. I said that if everyone paid everything off, and no one took any debt out – the banks would never require to be bailed out by the taxpayer ever again.

Crash Gordon has had a monumental impact on people’s attitude to taking debt on, if the markets crash more he (and subsequent pm’s) will have a mammoth task getting folk to take mortgages or credit out!

A good thing I may add.

So this guy Madoff was really careless and lost $50 billion. This top class investor kept losing and losing and nobody noticed. And all the money has just disappeared.

I wonder if invested in companies like Bear Stearns and Lehmans that went bust. I wonder who ran away with all that money before they collapsed ?

I think we may finally be getting to the bottom of the cause of this financial crisis.
I have thought for a while now that a 15% fall in property in the western world could not be the reason for the total collapse in the banking system which would have occurred if governments had not rescued them.
Financial managers have a lot to answer for.
This is still a financial crisis which governments have still probably not solved yet, nationalisation may be the only answer.

NewsSpotz - Hedge funds are currently riding trends rather than looking at any investment in certain parts of the economy.

https://www.marketwatch.com/news/story/Credit-SuisseTremont-Hedge-Fund-Index/story.aspx?guid=%7BA7631CF3-CFEF-48C1-8F18-74F3A5750650%7D

In the past, a rising tide lifted all boats.

Going forward, I think quality will out. Hedge funds will survive, but only the good ones

Nichola Horlick would do better sticking to

her namesake beverage.

DUE DILIGENCE MY BACKSIDE!!!!!!!!!!



The arrogance of this woman is CRAZY.

Simple truth is that hedge funds (and private equity companies) create nothing new so why on earth should anyone loose any sleep over their demise.

It is shocking that the fund managers and banks who invest in these hedge funds take such little care in checking them out. RBS has lost $400m - in my experience, before RBS would lend £1m to a "normal" customer, they would carry out extensive due diligence (mostly at the borrower's expense).

The failings of fund managers does not surprise me. My wife worked for many years for a fund manager (I would add that she did not work as a fund manager but in a support role) and it was clear that the main attribute required of the individuals managing funds was not ability to manage funds but ther ability to raise funds (i.e. who they know).

What gets me is that most of the financial services system is subsidised by the tax payer; how much money would pension funds have to invest with fund managers etc if employees did not receive tax relief on their contributions? For higher rate tax payers getting 40% relief, they are probably still better off paying into a poorly performing pension fund than saving the money outside of their pension scheme.

So, Bramdean (and no doubt all others!) say "in-depth due diligence will also be conducted on the fund managers' compliance procedures, risks systems and governance structure."

Yet another nail in the coffin of complaince auditing. Yet again being shown to be not up to the job of supporting 21st century governance and risk.

In order to protect investors - and now taxpayers - investments this approach just CANNOT be relied upon to do the job. The sooner that we start to understand and assess the BEHAVIOURS of people involved we can far better understand the TRUE RISK.

Ive only used hedge funds a few times since

late 2007.

1: For shorting HBOS shares which was FUN


2: For Oil Trades

Both times the opposite traders lost BIG

TIME.

Their combined loss was over 120 million.

POST 23

120 million Sterling

Fascinating stuff. Any chance of adding a chapter to 'Who runs Britain' to expound our current woes?

"in-depth due diligence will also be conducted on the fund managers"

The only in-depth due diligence seems to be where the swankiest bars are with their champagne !!

How wonderful these investment companies/mamagers promote themselves when all they are doing is riding the wave when the markets are going up. As soon as the storms gather they are out of their depth !!

To reprise an old joke from a couple of weeks ago, which seems very appropriate here;

Ditch the fools with funds of folly,
Fa la la la la, la la la la.
Before they make-off with your lolly,
Fa la la la la, la la la la.

10 NEWSPOTZ:

'Banks are weak because blogs like this have convinced everyone they are... '

What a crackpot comment. Do you read the news at all? Have you just landed from your mothership? Are you a 60s hippy just emerging from your hippy dreams? Are you Gordon Brown or Lord Mandeldome? A new Labour hack? Come on own up, who are are you?

Re : 14. JavaMan1984

I agree with the 'keeping it real' approach to buying goods and building credit. Most people try to dress like film stars, gangsters, fund managers etc when they are not and have only watched the DVD.

reiterating a comment in the deflation or inflation mass debate

421. At 00:15am on 19 Dec 2008, kikidread wrote:
If there was no credit spending would reflect real wealth.
It would be more considered and less wasteful.
If only cash is used there would be no purchases over 100 pounds.

Robert

The hedge fund industry is corupt from top to bottom. I say that with a family member who i really like working in one. He is one of those MIT Phd number freak types doing chaos/GARCH maths analysis. The whole industry is build on clever people with faulty models, making huge punts on whims. The faster they all unwind the better.

In good times they distort markets and fuel huge price volatility and destroy good companies and jobs to cream of profit. They are the ultimate asset strippers. It is no secret that the oil bubble was almost totally caused by hedge funds in conjuction with investment banks. Just look at the doubling of oil futures contracts in 1 year with no more than an expected 3% rise in consumption.

Hedge funds serve no purpose other than to charge 20% of the profits for their owners or 2% -5% of funds managed when they lose money.

I work in a building where 3 out of 4 tenants are hedge funds. I see their clients coming through reception and it is a 'whos who' of the rich. Recently i have noticed a surge in visitors. I suspect many are trying to get their money out.

The doorman (our building's version of the Oracle of Delphi) tells me one firm may well be in trouble.

Hedge funds have become too big and too powerful, able to influence the outcome of whatever they are trading in.
Regulation, regulation, regulation, badly needed.
This slump will search out the weak and destroy them, whether they are companies or financial institutions.

No doubt you'll now get blamed for causing a run on every hedge fund on the planet.

As if the millionaires who invest in this sort of stuff haven't already got wise to this days ago ...

If investors have been given documents stating that they perform meaningful reviews of various elements of a trust funds nature, does that mean they can be sued in order for people to get their money back?

So where are they going to move the money too.

The Bank of England for saftey, who will then lend it out to the banks, but under safer regulation.

Hubris from the much, maligned people's resource of Wikipedia. Well worth a read.

https://en.wikipedia.org/wiki/Hubris

I note it is related to...

* Groupthink
* Narcissism
* Victory disease
* Self love

To misquote the much-missed Dave Allen, may your god go with you, because the divine money has just vanished.

Best wishes to all currently losing or, about to lose their jobs.

Robert,

This story isn't much fun, can't you start a blog on the reluctance of the Halifax and Nationwide to predict house prices for 2009?

See: https://news.bbc.co.uk/1/hi/business/7791391.stm

The compliance and due diligence conducted by institutional investors all sounds terribly reminiscent of the Nick Leeson/the collapse of Barings 'incident'..... nothing changes, nothing changes. When will these people learn?????????????????

Anyway, just got to get on the phone and liquidate the billions of pounds I have invested in hedge funds - thanks for the tip Robert.

Well done Robert as the prophet of doom. However 20 years ago we were worried abot Africa. Now after all the Greed we are worried about ourselves. Take a look at [Unsuitable/Broken URL removed by Moderator] for perhaps the most appropriate Christmas Video. Also when watching Little Dorrit on the Beeb we see Mr Merdle and today's Madoff as illusiory geniuses of finance. This is not new it is just that the whole culture of the City and worship of the Hedge Funds has given us a catastrophic financial situation. I feel that the City of London and also New York are so tainted that Frankfurt will benefit. Are we to return to a more 60's style of economy. So Robert where is your Crystal Ball.

hedge funds are high status for investment banks who often tell clients that they have one even when they don't.

Robert,

You really don't know what you're on about here.

Hedge Funds have been suffering major redemptions for 12 months. On top of that many reputable ones have failed to "do what they said on the tin" and provide stable returns in a range of markets, including falling ones. On top of that, they've had their erstwhile lenders, such as GS and MS become banks and be forced to reduce their own leverage, with a consequenty impact on leveraged Hedge Funds. Put all these together, and you have forced sellers, which explains why markets, in particualr equities, appeared to have discounted everything short of Armageddon at end-November.

Looking over a longer time horizon, what the easy markets of the last 5 years or so have done is allow some pretty ordinary fund managers to prosper. There have been a whole load of people who moved out of large fund management houses and set up their own Hedge Fund boutiques, lured by the idea of charging 2% flat plus 20% performance fees: much higher than they could earn as a wage slave anywhere. Now they've been found out.

It appears to have escaped your notice that pre-Madoff there were already stories of 35-65% of Hedge Funds being closed over the next year. I doubt Madoff will have any real impact on this either way. There are plenty of Fund of Hedge Fund Managers who can point to their due diligence putting up red flags on Madoff, and such people will prosper. Check out Bloomberg. There are ton of stories all quoting Askia: an advisory outfit that red-flagged Madoff nearly 10 years ago. They're using this as a positive marketing story.

You're right that the Hedge Fund industry is shrinking, but it's really no different to Woolies and Jaguar: credit is being withdrawn and those with poor businesses will suffer. In the case of Hedge Funds, that means those that promised stable returns in all markets but are now 20% down on the year will fold.

Madoff is a sideshow. His fraud will only impact those firms that patently did not do adequate due diligence, of which Bramdean will be the most publicly notable one in the UK. Why is this, though? Well mainly because Horlick has been rather better at self-publicity over the years than she has been as a fund manager. Look at Bramdean's total assets under management. Hardly a major player is it? Ever wondered why? The Madoff episode helps explain it.

Was it Woodie Allen who said:

"investment advisors invest for you until you have nothing left to invest"?

Robert, Obviously the "the investors want out...". They have only themselves to blame for being "in" in the first place. and why were they "in" ? - greed - pure greed. The chance to make a quick buck (or trillion)out of nothing. They same greed that drove "investors" during South Sea Year in the 17th century. Just dressed up in ever more arcane gobledy-gook - which even bankers themselves, admit they don't understand.
The banks are dead or dying. Bear Stearns, Lehmans, NR, HBOS, Citi... on and on and on. The dying ghouls desperately sucking out the last juices of the dead; and now turning to governments (us and the future of our children) for more blood.
The money banks (and all financial institutions) play with is not theirs - they make it up by creating debtors and sucking in greedy mugs. This is has been known for generations (by the bankers). As J.K. Galbraith said in his book 'Money - From Whence it came etc' "...the mind is repelled when one realises the ease with wich money is created out of nothing" - he said that about 50 years ago.

The mind is now repelled by the ease with which economic journalists seem to continually avoid discussing, or even mentioning more fundamental causes of the West's financial and economic problems.
You are the BBC's business editor, yet constantly focus on the FINANCIAL disasters. FINANCE can only exist if there is some sort of ECONOMIC foundation upon which it can prey. The financial crises we are witnessing are SYMPTOMS not causes of a much deeper problem.

When are you going to discuss fundamental ECONOMIC cuases of business' problems:
Peak Oil.
The logical impossibility of constant growth.
The Exponential Curve.

The world and its rescources, which are finite (and have passed peak production) cannot possibly support demands for ever-increasing growth.

For those who missed my previous posts here are some intersting and thought-provoking links that do address these crucial issues:

How it Ends
How It Ends

'Money As Debt' on GoogleVideo
Money As Debt

The 'Crash Course' on Chris Martenson's excellent web site:
https://www.ChrisMartenson.com

www.notbornyesterday.org
Not Born Yesterday

Old Groucho

extremesense in comment 37 is talking extreme sense!

Compliance and due diligence checking has moved nowhere since these previous failures. It is easy to check bits of paper and numbers - but even easier to make sure the bits of paper and numbers show the 'right' things.

The old model of compliance checking and due diligence needs a complete overhaul if anyone is going to have confidence in what it says in the future. And confidence is all!

The problem as I see it is that although new models are there to identify real risks, most people in positions of power don't seem to truly want to have them exposed. Surely it is the role firstly of the hedge funds and all who hold money for other people and secondly of the regulators to make sure they are made visible.

Hurrah for the Swiss!
Or, anyway, Credit Suisse. For insisting that banker bonuses are paid in the dodgy funds that the banking industry created. Probably the only way to get the banking bosses take any notice and make things right?

Am I correct that John Major is on the Credit Suisse board or equivalent? Clearly an example of Tory superiority over Blair (JPMorgan six months after PM and loads of dosh from Goldman Sachs too...)

Hear that money is just disappearing into RBS faster than the Government can pour in. If Gordon'll do this for the Scotland vote, what won't they do for their marginals?

Good morning from the funny farm Robert. Just logged on to get my daily fix of Peston's Picks. A much needed daily dose of sanity in the mad house. Have a good weekend. Stay safe -
there seem to be more seasonal drunks about
than usual. Look forward to reading your next
reports on the crazy financial card games being
played by the "no-hopers" who still believe that a House of Cards is a strong and unassailable construction.

#3

You took the words right out of my mouth

#23

Darlings going soon. Wanna job?

#36

I think thats because they are Sh*****g themselves

It's about time we had some arrests.

The entire financial system has been shown to be a figment of bankers imaginations.

Yet bankers swan around as if nothing has happened. Pathetic.

#10 - Surely the mass communication going on in blogs is better reasoned than pub chat or worse financial professionals telling us what they want us to hear.

I am all for these blogs even if they are overblown, we are all human we all know we overestimate things (upwards and downwards).

Quite a few commentators - expert and lay - keep seeking to persuade me that this crisis will run its course in pretty much a linear fashion following the same, basic rules of previous economic downturns and that we'll be climbing out of the dive at the end of 2009, early 2010. Oh really?

This crisis has been and, presumably, will continue to be riddled with those characteristics associated with the law of unintended consequences. Moreover, I don't believe that any previous recession (or, dare I say, depression) started from the same set of going-in circumstances that this one has.

This latest revelation is a case in point; who would have it thought it eh? I'll wager that we'll continue to see these "Oops, where the hell did that come from?" events over the coming weeks/months, each event compounding the previous ones and creating a snowball effect.

I know I'll be categorised as a doomster by the glass-half-full brigade but I live by the creed, "The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails".

Forget all done and dusted by 2010. I'm adjusting my sails right now.

my advice to hedge fund managers and every one else is:

- you never realise or appreciate the true value of wealth (money) until you have none.

So Robert, are we now starting to play the blame game as those in positions directly attached to the credit crunch see a period of ACCOUNTABILITY approaching?

Will we see many exits from enterprises with whatever pay offs they can leverage?

Have these Bankers seen into the abyss?

Otherwise I'd say that your blog entry is a little lacking in detail

post 49 moraymint


My money is on 4 to 5 years then a very

flat period for a further 6 years.

What I find fascinating is that for every pound LOST by a speculator, investor etc, somebody else has GAINED tht pound.

Why has no one asked which parties have been the beneficiaries of the huge boom we have had.

End of the day, the monetary system is zero sum + INTEREST.

Global losses that are reported day after day are in no way equivalent to just the INTEREST (ie the inflationary component of the monetary system) therefore one mans loss is another mans gain.

I suspect city slickers creaming huge bonuses, bank shareholders receiving huge dividends and fund managers creaming hude fees have been the GAINERS for the last decade.

What beggars belief is that some of these same "winners" are labeled as "losers" now that the bubble has burst and are getting sympathetic treatment (think bank shareholders mainly)

I still believe full market forces should have been left to run their course.

The world has a major problem, and that is financial responsibility. If you entrust your wealth to someone else and invest with inherent risk, it is YOUR ultimate responsibility. Hanker after huge gains and you are gambling with your future wealth.

I would expect going forward, more and more people will be self managing their wealth, pension funds etc, to the extent that the safest investments (namely fixed term government bonds/gilts) will be the order of the day.

Either way, it seems Hyperinflation at some point in the next 3 years will kick in so Everyone's wealth will be eroded to in real terms in order to bail out those with massive debts!

I am older than Preston, so I wont involve my musical (Hill)abilities. What many do not know, never heard or, and would not believe in this industry, is what I called 35 years ago NAME LENDING. In the case of Madoff, it was so easy for him having held one of the highest position of recognisition in the industry. He MUST BE squeeky clean, and the way he operated the scam was even more shrewd. He would decide who was good enough to enter his paradise, and not the client checking him out. It was extremely astute by him. But as said it harks back 35 years to my knowledge of NAME lending. I will NOT name the person, but a certain well known shipowning name in Greece, had got a loan of 85 mill usd. He defaulted. He was actually jailed on a Greek technicality of issuing a cheque with insufficient funds to cover it. He spent nearly 2 years behind bars. Which makes him a CRIMINAL - yes or no? Right. So, he gets out of jail and in 48 hours has no less than 3 banks knocking on his door offering him 90 usd million - enough to cover the loss of the first and get on. He got that too, and lasted about 8 years before finally falling down bankrupt. NAME thats all. It stinks. I often wonder if I changed my name to Lord Fontelroy of North West twicklesome if I would get my business loans without the hasstle I face presently, I believe yes!

Its clear that savers should be penalised severely. Everyone must be FORCED to spend everything they have. This is now a patriotic duty. There can be no backsliding on this!

As a representative of HMG, I have to say; don't think we saved your bank deposits for YOUR BENEFIT, we saved them to confiscate as soon as we run out of readies - not long now citizens.

Christmas message from Zanu-NuLabour: get out there and spend, we are, and don't worry about the future; we don't have one so why should you.

#46

"Hear that money is just disappearing into RBS faster than the Government can pour in. If Gordon'll do this for the Scotland vote, what won't they do for their marginals?"

Wasn't the head of Lloyds on R5 yesterday saying that noone gets any of the bailout money until January..........

Perhaps it might be appropriate to draw comparison between Madoff management of investor funds and Brown's management of taxpayers funds.

i.e.

a) Lots of schmooz and gaily painted promises of sound economic management, when in fact the management of funds is far from sound.

b) Borrowing from future take to pay out now and thus give the false impression of soundly managed curent policy.

c) Adherance to investment processes based around similarity with Ponzi principles of when in debt, create more debt.

d) Wholesale disappearance of investor value and net worth, leaving investors and their future generations stuck with wealth destruction for years and years to come

e) Realisation that the dead-end has been reached and there is no way out, followed by final admission of failure of current practices.

The latter stage has not yet arrived for one of the parties named above but the direction comparison does make one question as to where Brown's economic management resulting in collapse of the Pound and greater future net debt will eventually lead to.

Whichever way you look at it there does seem to be some similarity in method.

Anyway, not a pretty prospect for those initially trusting investors and taxpayers who may have been scalped and duped by either of the parties

#5

The old Game Theories are being used already.

I think the choice will be between

Iran
Venezuala
Canada
Nigeria
Saudi Arabia
Kuwait

(not in any particular order).
The problem this time is that, due to various alliances and due to the desperate times we are in, the attacks will provoke a world war.

The thing I am quite looking forward to is how the Govt and some of the media persuade us that Venezualans and Canadians are part of the axis of evil. Will they even try to invent a story this time?

The BBC tried their best to be fair last time but were white washed in the Hutton report. Poor humanity. Poor, strange race of beings that we are.

re : 56 better watch out
banks may up their losses and get more money
that's a tax fiddle in every sense (in and out)

10. At 11:55am on 19 Dec 2008, NewsSpotz wrote:
I think you are seriously underestimating the ability of high quality Hedges to recover and UK PLC. Many have already put risk adverse strategies in place for sometime now, seeking Fund Management status to help find other sources of income to offset redemptions and various other measures.

Banks are weak because blogs like this have convinced everyone they are, share prices have collapse and so has their capital ratios as a result. I hope this blog starts reflecting the real economic situation soon!

There is nothing REAL about your version of it. That's the whole point, though since your paradigm and jargon doesn't allow for such a position there's no point in me expanding on it.

Re 36 & 46 - I think we'd top 400 posts if we could get a blog going on this one!

post 46

I would do the job.

But the Media would want to destroy me

because i only deal in TRUTH.

Now this is how to make them work better.

https://news.bbc.co.uk/1/hi/business/7790695.stm

We really must get back to funding business with equity rather than borrowing.

Equity is permenant,equity is interest free, equity gives the provider a say in how the business is managed.

#13 Gednorth thanks for the post.

We've had Madoff, Rubin, Ross.

As the markets fall, frauds and "oversights" are uncovered. Expect more and more to come to light.

#40 JayPee
"Madoff is a sideshow." Perhaps, but very symbolic.

This is all a re-run of the 1929 crash. For Investment Trusts then, read Hedge Funds now?

Expect a crash in the New Yew, and I'm not talking about the 35% fall that's already happened, but expect a short rally beforehand fueled by optimists like JayPee.

Why don't people bother to read their history books?

Due digiligence, FSA controls etc etc.

Its all a myth as has perpetual growth born out of stupid borrowing.

Brown eyes has gone biblical with the AofC but fails to remember the biblical 'money is the root of all evil'. Book of Peston, Ch3 v69

Or maybe it wasn't Peston but should have been..........

Stuck up banks do not even want pensioners or poorish people's money. MLIM tell clients they have to have a million pounds in their accounts.

It reminds me of what all parents tell their children before crossing the road.....look left, look right, look left again and then cross, looking as you go.
Perhaps we need a sort of Green Cross Man for hedge fund managers and others who seem to have walked straight across the Great Fraud Road without looking and then got hit by a juggernaut with sign saying Bernie in the windscreen.

I don't see how the potential collapse of the hedge funds can be such a bad thing.

If the rich folks withdraw their money from these funds, then they have to put it somewhere else
- in the banks (that would solve the banks' funding problems)
- in Government bonds (that would solve the Government's funding problem)
- in the stock market (would also help)
- in start-up high-tech industries (ha, ha, ha)

And if the Hedges funds can't pay up and go bankrupt, then it's hard to be too upset about them and the rich people who hoped to get such enormous returns out of them.

There's something fishy about things going on - for example, [Unsuitable/Broken URL removed by Moderator] a week before they were exposed and before the merger even became considered.

There's something fishy about things going on - for example, www.rtlinfo.be reports someone registered [Unsuitable/Broken URL removed by Moderator] a week before Fortis were exposed and before the merger even became considered.

Incidentally, there are a couple of interesting stories about the Irish banks doing the rounds today.

The first involves Anglo Irish Bank, which has significant interests in UK property development as well as in Irelan, I think. Three Directors have resigned over the "hiding" of EUR 87 million of loans to one of them by Anglo.

https://www.rte.ie/news/2008/1219/angloirish.html

The second story is that there will be a clear out of senior management in the Irish banks as part of the deal to see them recapitalised. It would be interesting to know why smethong similar hasn't happened in the UK. I know there have been one or two symbolic resignations in the bailed out UK banks, but the Irish cull looks to be something more drastic (and necessary - bank management here is a total joke).

https://www.independent.ie/business/irish/top-executives-may-face-axe-in-836410bn-rescue-deal-1580499.html

"As hedge funds deleverage, de-risk and reduce their debt-financed investments, there's a substantial knock-on to the ability of all banks to lend, because of the vicious interconnection of falling asset prices...

Hobbled hedge funds mean weakened banks - which means less credit for us."

Well Robert, if you say so, I believe you, because you're jolly knowledgeable about such things.

But here's a question. Did those assets actually exist in the first place? If the assets were just based on some clever financial trickery that had no roots in the real world, wasn't it inevitable that the banks would be weakened anyway? Isn't it a good thing to get the pain over with as soon as possible so that the banks can start rebuilding themselves based on assets that actually exist?

So the sharks are swallowing up each other until they disappear into that final black hole.

It's going to be really interesting just how much money there really is left at the end of the day.

Reassuring for the small investor that it's just not them who have lost their money

Never mind we still have the British fighting spirit as Gordon said today.

Seems like he's come down to earth with a crash and realised he didn't really save the world.

Hard on those who believed him but most of us knew he was only joking.

it is all about greed. If you have a £100 million is it really necessary to want 12% return from a hedge fund? wasnt 6% in HSBC enough to live on? They deserve to lose the money just as one loses ones stake at the bookies when the horse doesnt win....hedge funds are just bookmakers.
Regarding the present problems (and you aint seen nothing yet!) I think the rot set in when my local bank started to try to sell me "products" and started calling the staff "customer service advisers" instead of just lending deposits to well established borrowers!

where will in end....in tears, GB/AD have as much idea of how to run an economy as my dear old mother, and she is suffering from dementia!

Rahere????????????????????


What did you say?

Until all the messes are sorted out banks should operate under american style chapter 11 bankruptcy to consolidate their financial data.

It would mean rebranding Company logos with DIP debtor in possession for a short while.

# 65 reportthetruth

FTSE is already 15% + above its November lows, S and P is over 20% higher. S and P also broke through its 50-day moving average earlier this week. I could add more stats about hisorically low pe ratios etc. But just making the point that many of us have read our history books as you suggest, and history tells us we're looking at a buying opportunity thats unlikely to be repeated for another 60-80 years.

Check out Buffett's comments on investing throught he 20th century. We've seen far worse conditions than we have now, and the Dow went from 60 to over 11,000 over the century, bottoming in September 1932 at 40-something.

This is a crisis caused by Politicians. The bankers and Hedge Funds simply exploited the low interest rates created by the Politicians.

Low interest rates created the illusion of wealth and funded wars. It meant reelection for those who saw themselves as God's chosen ones.

Bush and Blair/Brown all wanted a legacy and they now have will have it:

The Second Great Depression

well worth a read.


https://www.monbiot.com/archives/2008/12/16/pin-striped-pirates/

42. oldgroucho

Keep up the good work. Don't expect Peston to join the debate on any of the topics you mentioned.

He knows which side his bread is buttered.

Robert you talk of the negative aspect of the seriously rich pulling their money out of hedge funds but what will they do with it? Hedge funds are no more than middlemen for lazy investors who what someone else to make all the right decisions for them to maximize their profits, like all cons and schemes (not that I think the majority of hedge funds fall into that category) they rely on greed, someone wanting something for nothing, in this case a higher return for doing no extra work. Maybe this just means that these investors who were looking for the large returns on their funds will have to do some work themselves or accept a lower return but at the end of the day their money will still need to be put in the system somewhere. Maybe the more risky investment opportunities will suffer but that will only be until the yield offered starts to outweigh the risk
14. At 12:02pm on 19 Dec 2008, JavaMan1984 wrote:
Cancelled my ONLY credit card yesterday (was always paid off at end of month), the nations largest building society was baffled.

Javaman1984 I too would be baffled why give up a service that costs you nothing, gives you protection on purchases and is hugely convenient ? It is not credit itself that is the problem it’s the miss use and over reliance on credit by those who use it to live beyond their means that is the problem. You sound like you are prudent so unless you do not think you have the will power to continue on that road, why give up what will be for you a free service?

53. At 12:58pm on 19 Dec 2008, Nataku wrote:
What I find fascinating is that for every pound LOST by a speculator, investor etc, somebody else has GAINED tht pound.
If only it were that simple I buy a house for £100k I sell it for £150k and buy one for £200k the person who bought my house on 100% mortgage defaults and house prices have fallen and the bank can only recoup £100k a £50k loss my house is now only worth £150k I’m even the banks lost £50k you may say that the person who sold the £200k house has made £50k but that is only if he has left the market, even then they will have rent to pay which will eat into any profit and that’s without all the various fees and interest that would have been paid. Same applies to any investment rarely is it as simple as a winner and a loser and there are always costs involved in any business/financial transaction.

"Made off with all our money" is a very fitting title also for Maxwell, Enron, Rubin, Lehmans etc. These are real financial and economic WMD which kills masses.

#15 forumdud2 wrote:
"So this guy Madoff was really careless and lost $50 billion. This top class investor kept losing and losing and nobody noticed. And all the money has just disappeared.

I wonder if invested in companies like Bear Stearns and Lehmans that went bust. I wonder who ran away with all that money before they collapsed ?"

The same question I have been asking. This is one financial WMD too far. We must find out who have ran away with all the money, down to the last $1m. It only costa few thousands to get a MP to ask questions at the Commons. Over the years and decades, these people who profited from these scams and frauds must have used the enormous amount of money power to corrupt governments, the legal systems, foreign policies, world security, the financial systems and maybe even fostered and started wars, all at our costs and to our detriments.

#10

Blogs like this have destroyed confidence in the banks?

Lies and marketing was the only thing that built them up.

It is clear you have a personal interest in the success of FoF and the like. For that reason your post is more or less null and void. I hope you invested a lot into it.

Tell me... Which BLOG ruined the banking industry in past history?

Since government borrowing is increasing faster than anticipated and tax revenues are decreasing significantly it would be useful to understand where you see the government borrowings are in relation to next year's predicted GDP and not last years GDP as currently reported.

Talking about hedge funds isnt Chrysler owned by a hedge fund called Cerebus? So the US taxpayer is bailing out a hedge fund!..........President Bush has just announced $13.4 billion in emergency loans to prevent the collapse of General Motors and Chrysler, and another $4 billion available in February with the entire bailout conditioned on the companies undertaking sweeping reorganization plans to show that they can return to profitability.

So there is no gold at the end of the rainbow because the King of the Leprachauns has magicked it away.

What a surprise!

It is the rich, the super-rich, the hedge-funds, the bankers (again), the regulators (again) and the politicians (again) who have to accept the indictment as to their gullibility and all the misery this will cause to other less powerful people. Will we see heads on pikes?

The world has been living in faerie-land for the last five to seven years or so and now the wicked witch has come to repossess the magic castle and flog the unicorn off to the genie from the happy-hour bottle.

The only person with any sense is the washerwoman and the rest of her class as they have long known that nothing is for nothing and all has to be worked for.

I note Baron Hardup of No.10 has not yet realised that in mortgaging his estate for a mess of pottage he will soon become Peasant Very Hardup of Godknowswhere.

I think we just have to appreciate that there is nothing new under the sun, most crooks are just stupid, being clever does not mean that you are intelligent and that perhaps we have made civilisation too complex for anyone to understand.

Nobody knew bloggers had credentials. I've performed in high powered positions in my sleep for over 20 years now. This financial stuff seems like a piece of cake

64 - I take your point but I'm not convinced that is as simple as that. For example, I'm sure that the lenders to many companies are currently having quite a major impact on how business are being managed through banking covenants etc and I'm not sure that the majority of the holders of equity in RBS, HBoS, etc other than the large institutional shareholders have much say in the management of these companies.

There is nothing wrong with sensible borrowing to fund working capital and also, to an extent, to fund acquisitions. The problem is where too much funds are borrowed to leverage up acquisitions in order to produce a greater return on investment for the equity providers.

89
I am making a general point.

I am not suggesting that there should be no borrowing . I am suggesting that borrowing has replaced equity far too much.

The influence that the shareholders would exercise would largely be at the point where capital was raised using share issues.Where they would buy or not, and if the Co was not being prudently and profiatbly managed the share issue would fail

In my youth rights issues were legion. When cheap money came along they declined rapidly.

42 OldGroucho - good posts. It seems that even Gordon Brown no understands the looming energy crisis/peak oil. As soon as the global economy recovers, oil prices will rocket up again which will then stall the growth.

There is still plenty oil out there but it is becoming increasingly expensive to get out . The current problem is that the oil companies are reducing the capex required to maintain the levels of supply (or slow down the rate of decrease in production) in view of the lower oil prices. The cost of getting the oil out of the ground is an indication of the amount of energy required to get the oil; the point is that the amount of "free energy" (the amount by which the energy in the oil produced exceeds the amount of energy required to produce it) in the oil to be produced in the future will diminish and this will restrain economic growth.

#91

Bring on a combination of renewables and a massive efficiency drive so we need to generate less energy.

It seems to be a given that Madhoff has perpetuated the biggest Ponzi scam ever at around GBP50B, but this is not so. Flash Gordon's Ponzi scam over the last ten years or so has accounted for a very much larger figure.

Glutton Glutton Glutton
It is so sad that the Greed culture is about to wreak such world wide grief to millions of people. The Banks the financial regulators the Politicians ( all in cohorts with each other ) are those who have all of this misery on their shoulders.
It is a shame that the desire to have the biggest house in Hampstead the most expensive Car - the overseas Villa in south of France, the biggest boat moored in the harbour, the best hospitality box in twickenham and then once having been sated with material wealth to then look and become more greedy in seeing others that might just have something that they dont have.

We seem to want to reach soddom and gomorrah. At the end it all comes tumbling down.

Those who got us into this mess should lose their jobs and they should be made to give up al their assets and move in to a 3 bed terrace house in Peckham -shop in Tescos ( not waitrose ) or is that too severe?

What we have seen is like a big poker game in the wild west where everyone has been cheating:

Some players including the sheriff and the deputies (UK/US/EU) have been slowly losing but they dont care because they are paying with IOUs.

Some players (OPEC) have been playing as a team and holding aces up their sleave.

Some players (China) have been marking cards (distorting markets to favour their exporters).

The casino (Banks) have been laughing at all the cheating and taking a cut off all the action.

Now we just discovered one of the croupiers (Madoff) has been palming chips.

For a long time everyone was happy with their own scam. But the level of cheating got larger and larger until the card counters and team players have suddenly noticed the casino will never be able to convert the IOUs into cash so all they have won is plastic chips.

The IOU passers have also woken up and noticed there are far too many aces in the deck and there are big blue crosses on the back of all the kings so they are not sure they should pay off on all the IOUs anyway.

The question is what the new sheriff is going to do to resolve matters. The UK is a deputy sheriff, it needs to respond strategically rather than lead.

91. At 2:50pm on 19 Dec 2008, nedafo wrote:
"There is still plenty oil out there but it is becoming increasingly expensive to get out "

Where is your information to back up this statement or is it assumed that extracting the oil now is more expensive than previous years ? I read an article on Wikipedia today (I assume correct) indicating the biggest oil producer (Saudi Arabia) has some of the lowest extraction costs.-
Please explain your alarmist "increasingly expensive" or shall we stick to the facts ?

I get the impression most readers/contributors to this blog just want the facts - Strange but we never seem to get ALL of the facts from Robert Peston.

# 52 alexandercurzon

We're going to be reeling from this for 5 - 10 years hence, maybe even longer.

The principal reason is that the end-of-cheap-energy will kick-in with a vengeance in the same timeframe. Consequently, we'll not re-establish previous levels of economic activity. Throw in the demographic effects of our ageing population and our stupendous pension liabilities, not to mention all the other cosmic levels of debt and contingent liabilities on government spending now being run up by The Brown Terror ... and it doesn't take an archbishop to work out that the austerity decade lays before us.

I really do need one of the more optimistic bloggers amongst us to describe what, when and how recovery starts later next year. What's the catalyst?

With the advent of the big bang at the end of the 80's when the city and finacial markets around the world went global, there was always a danger that the money markets would end up in such a horrible mess, simply because the likelihood of such problems happening was grossly underestimated or were not fully understood at that time.

The rate at which information technology was advancing ensured that vast numbers of transactions could be carried out simultaneously and this information could then be transmitted around the world in as instant.

This IT explosion made it almost impossible for the senior decision makers to fully digest and properly understand what was happening and so they became increasingly dependent on the honesty and integrity of their subordinates.

By the beginning of 2000 the clever and more corrupt fund managers and traders new they could afford to take foolish and risky decisions safe in the knowledge that if things did go wrong they could make a pile of money and be gone before being found out.

Madox is just an extreme example of such behaviour

#76
Kindly ask the moderators to repost. Rahere is landing an International Organisation's accounts at the moment and doesn't have time to play with people whose ignorance is only exceeded by their stupidity in returning mail to his cut-out mailbox fully annotated ready for use by their masters to shoot them.
The reason they killed that post is that the reputable foreign press website in question suggests this entire crash is a spectacular fit-up putting Madoff in the shadows. They probably killed it because it's in (gasp!) French, and you shall not speak foreign languages here - regardless of the f

#76
Kindly ask the moderators to repost. Rahere is landing an International Organisation's accounts at the moment and doesn't have time to play with people whose ignorance is only exceeded by their stupidity in returning mail to his cut-out mailbox fully annotated ready for use by their masters to shoot them.
The reason they killed that post is that the reputable foreign press website in question suggests with hard evidence that this entire crash is a spectacular fit-up putting Madoff in the shadows. They probably killed it because it's in (gasp!) French, and you shall not speak foreign languages here - regardless of the fact said language is 45% of our own.