Robert Peston - WTF

Our former friend and plugger, ITV's Robert Peston has a new book out. It is, somewhat predictably for a Remainer, about how terrible  voting for Brexit and Trump could be for the world economies.



What isn't predictable is that Robert now believes that the people were absolubtely right to vote for both Brexit and Trump. 

He states that the political elite, of which he expressly includes himself, had, and have, a huge disconnect between what they think and feel and what millions of ordinary people think and feel.
 He gives plenty of economic arguments for why that is so
.And also has recognised that for very many who were told  'if you vote to leave, things will become really bad for you,'  believed things were already pretty bad. And were unlikely to ever improve unless they voted for change.

Here is the rest of Peston being interviewed by Iain Dale about his new book. 
WTF 



Not a word from the leading Remainer that I disagree with.
Repentant Sinner. Take your place back at our table.

CU might even give him a link him again.

Themes for a Grey Monday Morning

Damp and grey in London here today, and the news is varied: sublime, ridiculous ... and probably quite significant.  In reverse order:

Ukraine

Did anyone notice a massive event on Friday?  Putin, Merkel and Hollande convened in Paris, complete with dragoons in shiny armour, to solve Ukraine ...  except that there was no communique afterwards - search the web as you will.  That, friends, is not a trivial matter.

We are left to speculate.  Did they make so much progress that they are minded to keep schtumm and keep at it?  Did Putin come in waving his Syrian-bombing willy in the expectation M + H would immediately remove sanctions?  Prior to the meeting, the WSJ quoted Merkel thus:  “We don’t associate the question of Syria with Minsk, these questions are not linked.”  She was obviously asked about it afterwards but the French press seem to think the issue was marginal at the meeting.  What about Ukraine then, eh?  Putin must be so hoping to have sanctions lifted.

Green Grauniad

Flushed with the success of its campaign for divestment of fossil fuel stocks, the Grauniad is launching Phase II of its mighty climate-change campaign!  Keeps them occupied, I suppose.  Come December, we shall all be occupied - perhaps physically - by climate protestors, with yet another Hollande vanity-extravaganza in Paris to come in Nov-Dec, of course.  And there really will be a communique after that one! - however empty and *disappointing* it may be (and it will).  Both Hollande and Obama want it to be their legacies, Heaven help us.  Must write about that soon.

Pesto to leave Beeb!

We all remember Pesto's dominance of the airwaves and BBC website back in '08-09, when the banking crisis was in full swing.  Then, somehow, everything started to go a bit flat, and it was unkindly rumoured his scoops had dried up because a Prominent Treasury Figure was no longer briefing him in real-time.   (Here at C@W we could calibrate this: in 2008, a link from the Pesto blog was worth a massive number of hits, even more than Guido or Worstall.   Couple of years later and the effect of a Pesto-link couldn't even be detected.)

Still: Peston on the ITV ... didn't work for Morecambe & Wise, did it?

ND
  

The Mighty, Fallen: Tales of Two Leaky Banks

1.  Leaking Information

So then, Robert Peston.  Live by the leak, die by the leak, eh ?  His epic fail on calling the new Bank Governor is surely the final nail in the coffin of his reputation.  All those reporting scoops in the heady days of '07/08 - but not proper scoops, just his being used as a privileged conduit by a couple of highly-placed leakers.  Except now, he gets fed garbage.

Everybody has his number.  Here's how C@W can scientifically assess his decline: back in 2008, if we got a link on his BBC blog, we'd get thousands of hits.  Two years later and this had dwindled to hundreds or less.  Nowadays we don't even notice.

"As it happens, I did not think Mr Carney was in the frame because a well-placed Treasury source told me - in terms - that the unknown fifth person on the short list 'was very unlikely to get the job'". Pathetic. And wasn't he subdued yesterday, interviewing Boy Osborne?  Hope his fat Beeb package is success-based.

2.  Leaking Money

UBS - what a shower. When Kweku Adoboli was being sent down, the news channels played extracts from tapes of calls between UBS Compliance and the talented trader, with such gems as:  

Financial Controller: "So you're going to confirm exactly which counterparties are involved, and the quantum of the exposure".  

Adoboli:  "OK, will do". 

WTF ?  I fell off my chair.  There shouldn't be a trading floor on the planet that doesn't have deal-capture systems, confirmation processes and risk metrics which make these issues 100% transparent and subject to checks by staff who are independent of the traders, by the end of each trading day at very least, but near-real-time is the standard.  It should be like trying to do a transaction on the web: a required field pops up, and if the entry doesn't compute perfectly, instantly, you can't progress to the next stage at all.  (Given that Adoboli was in a 'Delta One' outfit - deals with the simplest risk profile - there aren't even any complex sums to do.)  

Phantom counterparties ?  Trade books he 'set up himself' ?  And all this 3 years after the banking crisis.  So UBS indeed deserves to get it in the neck.

Gaol.  Only language they understand - and corporate fines be damned.

OK, not you Pesto - ignominy will suffice.

ND

Mis-selling Derivatives ? Do Let's Grow Up

OK, first up there are laws about this stuff and no bank should be selling derivatives to any person or organisation deemed incapable of understanding them properly. Know your customer and all that. But an interest-rate collar to a commercial enterprise ? It's pretty simple stuff, despite Robert Peston's silly attempt to make it sound complicated.

An 'asymmetric cap and collar' ? Do us a favour, Pesto, it's a collar (or a cap and floor, same thing), and the asymmetry has nothing to do with the issue. The premium sounds ridiculously steep and it's that which raises the eyebrows, not the collar itself. But who knows what the credit-risk looked like for Barclays on the floor leg ? And how would a basic swap have been priced to the same customer at the same time ?

If Barclays have indeed screwed up on 'know your customer', the deal will be unenforceable anyway. So one presumes that technically speaking, they haven't.

Move along, nothing to see here.

ND

Brown speaks the truth at last

He does not acknowledge this of course in his interview with Robert Peston, but he make a damning statement:

"PM [Gordon Brown]: ...you cannot justify in a period of difficulty. We're raising national insurance by half a percent. These things are being done so that we can pay for our public services, while at the same time making sure that the economy continues to reduce the deficit. I think you'll end up with a situation where the debt levels in all major countries are roughly the same - Germany, France, America and Britain - and I think you'll get an agreement amongst all these countries about the right timing for us to take the further action that is, that is necessary..."

the important fact missed out is that our public borrowing was 50% less than that of Germany or France and even about 20% less than the USA on a standardised basis. So the Prime Minister is admitting that we have coped with this crisis half as well as our European neighbours.

That is a pretty bad attempt at 'coping'. Long-term it is a disaster, the only way out is inflation and if we become like Japan,the bond holders won't even allow that. What a terrible Government Brown has presided over.

What is the Peston agenda?

I note today that one of the UK's top business bloggers, Robert Peston, is again following a track on Executive Pay. This time about a retiring Shell executive.

Robert has posted a few times on this topic recently. Perhaps he sees the MP's expenses story and thinks there is a read across to a juicy business topic?

To me, Fat Cat Salary stories are a nothing, the money generally spent on Executive pay is a nothing in large companies compared to the price of decisions and investments the guys/gals make; If they do a bad job they get fired too. Shareholders can hold them to account if they can be bothered. Major corporates are not run like the BBC after all!

I do though wonder if Mr Peston has another agenda, is it possible this is a mild broadside about one's own pay negotiation? Are there not some rather fat cats within the BBC with whom one would like to be remunerated at a similar level, like Wossy for example?

We shall see in due course, will he stay or will he go?

Barclays in Tax Schemes Shock ! Furore !

Well, they all get there in the end. Back in October we gave the reason why Barclays was so keen to avoid taking the HMG shilling:

"there’s [a] price to pay for the Darling Dole: banks must forswear promoting and funding ‘tax schemes’. Long the bane of the HMRC, banks have had whole divisions beavering away, on behalf of themselves and numerous clients, corporate and private alike, at wheezes to deprive the government of tax revenues. And none more so than Barclays, whose clever (and entirely legal) tax schemes, particularly on the VAT front, are a significant business line. Some of their wheezes – that trick of avoiding VAT on new computer systems, eh, lads ? – have sent the HMRC into apoplexy."

Finally, Vince Cable – keep up at the back there, boy – has received material from a ‘whistle-blower’ (strange terminology because it’s most probable that nothing illegal or technically improper has happened) detailing some of Barclays’ cunning plans, and almost everyone else has piled in.

Barclays has some champions in odd places – well, John Varley does anyway, here in the Grauniad, which is also rather coy (is this the best they can do ?) about what the HMG shilling may entail:

“Allowing the government to take a stake in the bank is likely to come with conditions attached. These could include forcing it to … comply with restrictions on its activities” (our emphasis)

But the FT’s excellent Alphaville blog pulls no punches, seemingly because they are miffed at Barclay’s PR efforts to thwart their reportage (and perhaps they didn't get as good a lunch as the Grauniad chaps). They give us

“a little story about Barclays, a bank that in our view could now unravel at frightening speed …all the time it has to continue spinning the line that its balance sheet is somehow less toxic than its rivals … State-interference must be avoided at all costs since that would cost Barclays its lucrative tax avoidance business and also cost Messrs Varley and Diamond their jobs”

What, honest John Varley ? Barclays unravelling at frightening speed ?
Say it ain't so !

ND

UPDATE: it's all getting a bit heavy.
But where is Pesto ? Usually so quick off the mark, with so many banking stories, over so many many months ! What are we to infer ?

UPDATE 2: Alarm over, Pesto has posted ! (but he wants to hug the bankers - and no mention of the big B ...)

UPDATE 3: whisper it softly but they do say that the Grauniad's scoop is still available somewhere on the interweb

Conspiracy central: Peston covers for Brown?

Watching the news cycle today BQ and I have decided it has all worked out nicely for Gordon today. A huge news day, RBS having yet another bail-out and Lloyds to come tomorrow.

But what is the big story - Peston's Fred Goodwin RBS debacle. Amazingly too, letters from Paul Myners have come to light tonight too. It has all the hallmarks of a Mandelson type honey-trap.

Interestingly, Peston posted soon after the FSA yesterday had said that Brown was to blame for the light touch regulation that has got us into this mess.

As we know, Peston has a direct line to No10 and No11. I agree that Sir Fred is a ghoulish figure at the moment; a Karen Matthews for the banking classes. it is also a non-story in the sense that Goodwin has no legal reason to have to hand the money back.But today there was a lot of Government mess to get through, yet all the bad news fro the Government barely made the end of the broadcasts and will be buried well in the papers tomorrow.

How convenient.

The end of Pic'n Mix; Woolies bows out?

The Pesto Wire has another flash - apparently Woolies will go into administration, the Stores part tonight. BBC worlwide, the capitalists armed with the licence fee, will buy another piece and the distribution business will carry on as a profitable venture.

Long negotiations with the banks have failed, as they always do unless a company genuinely truns around its cash flows and builds working capital. Peter Mandelson could not help, much like Darling could not help Northern Wreck raising rates on mortgages today - the government is howling into a gale. Perhaps these setbacks will encourage a little more sobriety and less shouty 'saving the world' mouthiness on their part.

However, I have not yet entirely given upn on Woolies. Hilco was trying to buy the stores to sell some to Tesco and keep the profitable ones. It could buy the leases and warehouses out of administration, much like Barclays bought Lehman's having walked away when the company was alive.

At least Deloitte are the administrators, with a bit of luck it will be Lee Manning who is always very keen and good at keeping companies going.

Banks still a problem

Peston is reporting that there is trouble at Mill re the HBOS merger. Many HBOS ex-employees with shareholdings are aghast at the terms of the Lloyds deal. Sir Peter Burt,left, has form for this too. Earlier this year he was saying we should suspend accounting standards to help his old bank.

Well, good luck to them. Brown backed LLoyds to merge with them and the Government, slowly getting back some form of grip on events, is not going to get taken down on this. HBOS was in a terrible financial position and would not exist as an organisation today were it not for taxpayer support. The same cannot be said of Lloyds.

For all this though, the banks are still a huge cause of pain in the economy. Not lending money as they should, recalling loans and raising rates where they can on customers.

The policy of reviewing their books by the treasury and ordering them to take taxypayer support has still not worked. Libor is going down but is still high. The market are still prone to huge falls on any given day on the slightest bad news (and bounces too, as in all bear markets).

So, the Treasury plan is not working, interest rate drops look desperate. The Government, BOE and Treasury (..and FSA?) are still all flailing; and now they have hung out their credibility.

Expect more bad news until a more coherent plan is put together. The traditional muddling through has only stopped us being engulfed in the quick-sand, we are not free yet.

PS still on hols, back at the end of next week.

HSBC Half-Right?

The normally excellent Robert Peston has his thoughts here on HSBC's results this morning. Following on from LLoyd's 70% fall and the disasters at HBOS and expected at RBS - these HSBC results seem to be a shining star.

However, looking at the writedowns they have more than written off now their entire investment in HSBC USA; why don't they just close the business altogether?

Also they are still taking huge write downs, bigger than their rivals. HSBC moved some of it's SIV's (enron-style accounting that was previously hidden) onto their balance sheet in January and are now slowly writing this off. The difference with HSBC is that it has the capacity to do these write off's over time.

As such it will be many quarters before HSBC returns to it previously profitable position. Only by compairing to other banks can this be seen as success....