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roughashlar

Listed below are comments made by roughashlar between Tuesday, 9th December 2008 and Thursday, 21st May 2009.

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Indebted Britain 1:34pm on 21 May 2009 What concerns me for Britain's sake is that all the cheap (immigrant) labour is fleeing the country and some are even leaving their debts behind them. What concerns me even more is who is going to fund the NHS and pensions pots in a few years time? The City of London has been nationalised and the finance sector will never again employ the numbers of people it used to and will never again contribute as much to national coffers as it once used to. What other sector (manufacturing or otherwise) is going to step up and contribute?

What further concerns me is that the UK is not self-sufficient in energy supplies any more. There's another potential cold winter coming and the price of energy is soaring because investors are buying it as protection against all too inevitable inflation. What if Sterling is too weak by then to pay Norway's and Russia's prices?

Negative outlook followed by negative review followed by ratings downgrade is imminent in my book. Then the cost of debt soars and it becomes a bit of a death spiral. Better make sure British diplomats are getting out there and securing some wealthy friends. May not be just the banks that need bailing out in a year or so...
Bonus culture lives 12:28pm on 18 May 2009 Hi stilllitterarty. I've done a lot of lodge visiting and you get to know most of the guys and the more well-known guys in society are also fairly obviously well known in Masonry. Of course I don't know every Mason in the UK but the general trend is that Masonry attracts more of the social, self-improvement, charitable sort these days than the well-off, networking or famous sort.
Bonus culture lives 4:43pm on 17 May 2009 stevewo, I'm flattered you found my earlier posts relevant. I worked for an Australian investment bank in the City which didn't do retail banking (mortgages, credit cards, bank accounts) in the UK. It's really the investment banks that contributed to the meltdown and the retail banks such as Lloyds are now left to pick up the pieces. RBS dabbled in both investment and retail banking.

I've almost no doubt that modern day investment banking (whether it's on the fixed income trading or corporate finance side) has banked profits belonging to future revenue streams. The traders simply use the power of the bank's balance sheet to stop other less-capitalised traders out of the market and thus make trading profits. Traders can make money as long as there's a market but corporate finance needs assets to keep growing in value. However, nature teaches us that this is unlikely i.e. plants germinate, grow and die. Shareholders expect assets to keep growing revenues year after year. To do so they outsource labour to China and India. When China and India have become middle class (and thus too expensive to employ) they might outsource to Africa. But at some point profit growth will stop.

This 'crash' had to happen and we are all to blame for the addiction. Who here owns shares or a house or a pension fund hoping it will grow in value? Bankers were simply the pushers of the credit drug and the easiest to blame. They booked big bonuses because the profits were leveraged and brought forward to the present day. Future generations must pay. Unfortunately the same is happening with our climate.

I'm a proud Freemason (hence the moniker) and one thing I've noticed is the distinct lack of Masons in government and business these days. Sure, they used to be quite prominent in the past but now it's a little politically incorrect. Our financial system is a busted flush and until we go back to basics and back to 'moral' values I fear for our future.
Bonus culture lives 3:57pm on 15 May 2009 nburge, as a trader I know that we didn't generate wealth. Sure, we made money for the bank but we simply took it from somewhere else. The difference between the rate that central banks print money and retire money from the system (when adjusted for inflation growth) each year is the increase in real wealth. Anything above that is a paper profit which can be borrowed from the future to be booked today. Or else the profit is taken from somewhere else, usually by keeping companies and private individuals in debt.
Bonus culture lives 3:47pm on 15 May 2009 As a commodities trader in London I earned 120k per annum. I had almost infinite risk limits to go and punt the bank's cash on oil, coal, gas and power prices. I expected (no, I should rather say demanded) at least 10% of my annual PnL (profit and loss) in bonus. Except of course those who made a loss didn't have to pay in, they just never got a bonus. Trading is a free option. Considering my annual PnL was around GBP5m we were quite well looked after. Where did all that profit come from? Simply by chasing markets higher or lower, mostly higher....

It used to be that a coal producer got together with a coal buyer (eletric utility) and negotiated an annual price. Then the markets deregulated and the banks got involved to provide hedging facilities. Then people started trading these markets for their own sake and now you have to pay higher and higher energy bills each year. Of course we're going to run out of gas and oil so you would have paid higher prices eventually anyway... I was one of a handful of people responsible for 'commoditising' the coal market and for my part in that I'm truly sorry.

But actually you should be glad that banks punt commodities because they also drive the price down. What you should be really scared of is the mad buying and selling of other fixed income products like debt and government bonds. Extracting money out of nothing by risking something is the art of trading. It's only really got going in the last 20 or so years and it's going to bury us all!
Bonus culture lives 1:34pm on 15 May 2009 Let me give you a real life example of how the bonus culture worked (works) in a bank. Gas needs to be stored and salt caverns make good storage. So a 'project originator' finds someone who has a salt cavern and someone who has a natural gas supply. He puts the transaction together and leverages it up and hedges the future gas flows using AN ARTIFICAL FORWARD CURVE. These are future prices created by momentum traders who are buying and selling to make profits out of nothing, simply by risking the bank's balance sheet.

Of course the 'originator' banker has done a good thing here because this project probably wouldn't have happened without them. However, the banker walks away that year with a fat bonus BECAUSE ALL THE PROFITS ARE REALISED UP FRONT. In a few years time that project will probably fail because all the growth and upside in the project was taken by the bank and realised upfront. Don't know if this will make sense but this sort of thing is what has been happening everywhere.

Banks have financed vastly over-leveraged projects but have realised the future profits today! We have borrowed from the future and have spent it already. It's going to take years and years for inflation to catch up to make things worth what they were originally valued at. That's going to happen now by a simple devaluation of the currency. As I said earlier, God help us all!!! This has never happened before in the scale it's been happening and at the speed of the global world. Don't bother reading about the great depression. This is very different and potentially even worse than back then.

I have a farm in South Africa where I'm living now and enjoying the simple life where things have real value again. I fear for what is still to come because I can see the markets getting divorced again from the real world at an even faster pace now i.e. this recent rally. It's almost like the financial sector needs to get back to where we were to make it all alright again. That's only going to make it worse because commodities are rising rapidly again whereas people are not going to find jobs and earn real incomes for a while again. This divorce between the real world and the market is going to cause another panic and only when we've purged ourselves of the artificial markets we've created will we be back on track.

A very good (esoteric Mason) friend of mine suggested that when one age moves into the next there is a great battle between the visionaries of the new age (call it Aquarius) and the entrenched of the old age (Pisces). I wrote about all of this last year at http://tradeforce.blogspot.com
Bonus culture lives 11:23am on 15 May 2009 I was a trader for a large bank in the city. But before you get all uppity you should be thanking me for helping to push down the price of oil last year as we were big sellers. No-one complains when you short something like oil.

We realised a long time ago that markets (and our whole economy these days) works on the greater fool theory. That is, the economy is a big pyramid scheme that relies on a 'greater fool' to come in below you and buy you out for a higher price. It relies on increasing levels of spending and giving birth. Credit was the drug and the banks were the pushers. Everyone got higher and higher and the banks pushed the harder stuff. Then someone called the cops and the fun stopped.

Anyway, I've left the UK for a sunnier climate and I continue to trade the markets but for myself now. We don't seem to have learned the lesson here so I'll play along but at least I'm directly enriching myself instead of my boss. Good luck to you all and God help us.
Royal Bank as Jekyll and Hyde 6:12pm on 08 May 2009 Let's face it, the US and UK governments need sentiment to go positive again so stocks and house prices will go up again. So I've no doubt the plunge prevention team (aka Goldman Sachs) is out buying S&P futures again. Then finally the banks bad assets can be revalued at decent levels and the 'toxic' book can be taken out the cupboard again while 'profits' are booked on the books being shown to the public.

It's a suckers game folks. The piper must be paid one day. All that's happening now is that we're papering over the cracks and hoping to collect our fill before the next 'greater fool' comes along. It's also known as musical chairs and the music has started again. Yeeha, time to dance!

Anyway, you all need to come on down to South Africa. The weather here is great, the beers are cold and Armageddon will be a northern hemisphere thing anyway. The banks down here have been largely insulated from the crisis because the SA govt brought in a new credit act years before prohibiting over-extending lending.

Don't forget, you've still got a massive credit card bubble to pop still. Unemployment is inflating it as we speak. Then there's the coming pensions time bomb and the collapse of the NHS as Brown has broken the piggy bank for years to come. Oi, pass another cold beer there please.... Ah, hits the spot!
Mervyn and leverage 11:40am on 21 Jan 2009 It's a DEATH SPIRAL!!! Jim Rogers is saying dump all your sterling. Flee the mud island! Flee to the East!
The New Capitalism 05:40am on 09 Dec 2008 Yes, it will be a new age and about time too...

4000 BC - sun in Taurus - Egyptians bull worship

2000 BC - sun in Aries - Old Testament lamb of God

0 AD - sun in Pisces - New Testamanet fishers of men

2000 AD - sun in Aquarius - the great leveller

As one age collides with the next the established hang onto the excesses of the previous age and butt against the visionaries of the new age.

Also, the ancient Mayan calendar has it that 2012 is the start of a new age.

I've recently left the UK for South Africa because that's where my family is now and I want to spend more time with them.

Unfortunately I also believe that the UK is now facing severe financial stress as the economy (was) based on the financial sector as manufacturing had already been brought to its knees. There is also a huge pensions crisis to come and I also believe that there will be a conflict in the next 5 years (probably with Russia) over energy supplies.

My house in Surrey is now basically worthless and I'm handing back the keys to the bank and starting over again in South Africa. Good luck to everyone left behind.

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