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Tatruth

Listed below are comments made by Tatruth between Tuesday, 24th February 2009 and Tuesday, 22nd September 2009.

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Atletico facing the abyss... again 5:51pm on 22 Sep 2009 As rotten as a Gil property deal in Marbella. It's not hard to fathom were it went wrong is it? Why do Sport's Journalists have such an idiotic grasp of finances. Atletico try to compete with Barca and Real Madrid, whilst they don't have an equal income source. Transfer money and wages are spent over and above their income. When the transfer money is gone the wages are still there. Invariably the majority of players value sees depreciation. Hey presto last seasons ridiculous budget sees a mamoth collapse as expenditure is still above income streams. Without a mad rich dare I say dodgy entrepeneur like the Tappies, Berlosconis, Parmalat family and Gils - and even with the lesser millionaires like Gil & Tapie - it takes years of unravelling to sort out where the 'revenue' came from and needs now to go to.

Just like Portsmouth, on walks 'appy 'arry talking about how much transfer money he made for them. Whilst journalists swallow it wholesale and ignore the fact that every year he was there they ran a massive loss. Getting a six odd million profit on Johnson ain't much when you've paid out probably ten million plus in wages for one year of loan and two years of wages; then take off tax and employee contribs. So a club running at a massive loss then runs an even bigger running costs loss. Uhmmm where does that money go? Whilst Gils and Gadaymak have just seen almighty wealth destruction when their assets underwritten by securities and derivatives, are now worth more less than their obligations. I wonder why Atletico struggled financially in the last financial wobbles around the start of the noughties?????
Barclays' painful deal 11:56am on 20 Apr 2009 GHBRich at the risk of bringing the debate back to some previously mulled over points I'll try and adress some of the wider issues of GS and AIG. I enjoy your posts and understand their questioning approach, this is in no ways an attack on you.

Laughingbalcksheep is clearly an intelligent man and very informative on the nature of derivatives. However he is frustrating in his neglect of interpreting the wider economic pressures past the contractual issues of say a CDS.
Yes you are right Goldman Sachs are totally entitled to the payouts contractually from AIG. Much of AIG's recent payouts have been one off and are early cancellations of CDSs' covering the most risky of investments; contractually there will be a pre-negotiated cancellation fee. The banks receiving money from AIG are entitled to it. That is contractually definite.
The reality of the situation is that these payouts are covering very risky investments. The truth of the payouts is that economically they are unviable as AIG independent of the government couldn't pay them. Where say Barclays and GS did very poor assesments of their mortgage backed securities they bought, AIG did not cover their risk with counterparties.
The pricing of derivatives and rating of debt as we all know was hugely negligent. AIG were obligated to pay these banks, but AIG could not afford to do so and it's assets would have ammounted to very little if liquidated compared to it's obligations. Goldman Sach's claim that their CDS payouts from AIG were covered by other counterparties if AIG didn't payout. First of all this is disingenuous as much of the payouts were one off's to cancel CDS contracts and thus would not necessarily be at the same level from different counterparties; if indeed these other CDS's existed at the same level. Secondly failure of AIG to meet it's obligations to counterparties, would have created a devestating cascade affect where other derivative writers could not have met the payouts that AIG's collapse triggered. A big factor in these free-marketeers surviving is because of bailout from the political boys. Whether through direct CDS payouts or the protection of the system from an AIG bailout.
AIG one off payments in effect were state handouts to countless banks across the world. I'm glad it happened, I can't see what else should have been done. But it is a lie to claim that either Barclays or Goldman Sachs turned a 'profit' without state handouts and continued sleight of accounting.
Goldman Sachs phantom month meant big one off writedowns could occur. Yes of course this is what any bank would do investment or retail. People such as laughingblacksheep like to criticise politicians but without the bailout of AIG they neglect the fact that quite possibly he and many of his financial employees would be out of work. They are not in work because of Barclays and Goldman Sachs being anymore genius in investing and assesing risk.
The success of vendor financing is usually reliant on figures calcualted during boom times. Usually vendor financing occurs at the height of the economic cycle. When it happens during a recession it's something to be very afraid of. In this case it may work with inflation of the money supply by government, not really anything to do with Barclays' excellent banking skills.
Barclays sale of Ishares points to the unavailability for potential buyers to access finance. Considering institutions financined mortgages through the international money markets and particularly a carry trade from Asia, a return to easy to get 90% mortgages so quickly would be a worrying economic indicator. Where would all the money come from so soon after a boom?
Barclays' painful deal 11:07am on 15 Apr 2009 Just had a quick glance through your laughinglyderangedsheep comments lbs and had to chuckle to myself. Having been party to writing a few complex derivatives, I'd have thought you'd be able to calculate that without AIG's payout Barclays would have made very little if no profit last year.

Barclays being the fith biggest recipient of phantom dollars via the American Government via AIG. Oh look and who's the investment bank that's looking the most successful out of this mess it's Goldman Sachs. How much did that receive? Only about 12.9 billion. Both banks claim they don't need government bailouts!

Barclays never turned a profit last year, and didn't avoid government bailout it got it all from the US With billions of investments defaulting, it obviously had a fair bit of risky assets. Without US state funding it's risky assets make Barclays look like as big if not bigger basket case than many of it's rivals.
Barclays' painful deal 10:39am on 14 Apr 2009 Laughingblacksheep I read your posts on the technical side of finance with interest. For any insight into the wider economic mire you're insight is baaaingwhitesheep, just replace the baaing with brown when any financial difficulty occurs.

So here Barclays are financing the debt needed to buy ishares, whilst the repayment on the loan is remarkably close to the profit that ishares previously brought to Barclays. Isn't it amazing that CVC can suddenly turn a bigger profit, servicing the loan and other 'consultancy fees' when withdrawals from most financial companies are high? It's not much different to self-financing deals done by Enron where the main benificaries were the CEO's and financial officers. Except Barclays don't even have to spin off a chunk of their shares into a seperate entity, they just create paper money and take the loan repayments.

Hey that's modern finance and Barclays can't help themselves. Of course they're not increasing debt, it's a risk weighted asset for nothing... I mean 280 odd million. And that's nothing to do with adding debt to an economy where it wasn't before. This is what banks do, but this little accounting shuffle really shows how desperate they are for cash and how unlikely it is they can raise it externally. This shows come August/September when the pressures rise again their massive debts/assets won't survive intact the next phase of financial pressure.

But of course everything's Brown's fault. He didn't have a clue as to what you and your financial geniuses did before the credit crunch. But now you're not earning the money it must be all his fault. Barclays wouldn't exsist without Keynsian, Bernanke and Brown believing in bailouts and the printing of money. Whether they took money or not their risk weighted assets, so carefully balanced against their debt concerns, would be defaulting with institutions around the world unable to pay Barclays.

It's alright for AIG to payoff CDS's with make believe money but when Brown does it to keep people in work and not idiot derivative playing companies in business it's down right wrong. The market knows best eh? Or is it social deprivation and conflict knows best? Seems like you free marketeers are the new know nothings on history.

I am no Brown fan but thank God he's the PM compared to your Fabulous Bailout Boys, salivating around Milton's pavlovian free market bell. The market does most things better, but boy does a Friedman market need big government because you and your boys are wrong more than any politician. There's only one definite with Friedman economics, every four to five years the Fabulous Bailout Boys need a bigger and bigger set.
Barclays' painful deal 08:48am on 10 Apr 2009 A bank that just can't help itself but add to it's debt.. I mean assets. A bank that claims it has superior risk management than it's rivals. A bank that claims it has a level of probity above that of it's sector.

Where is this deal different to the crazed undervaluing and illegal kickbabcks from IPO's of the tech boom? This deal is clearly legal but reaks of the presently legal but bad practice deals at Enron and Worldcom; not their even more dodgy practices. Driving acquisition/wealth creation through asset price linked debt.

Who benefits? Not Barclay's shareholders who've just lost one of the most profitable parts of the bank. Oh yeah that might be the directors who've hugely undersold a business but all retain an interest so when it get's sold at market price they make millions more. Ha a new dawn in banking. Where is that different to underpricing an IPO, selling the stock to a client and demanding a kickback from the profits? One's legal and one's illegal but both are designed to stiff holders of common stock. Who benefits?
Back to the nineteenth century? 10:03pm on 19 Mar 2009 There is no political hunger for a return of the Glass Steagall act. Ultimately even with it's return the rapid increase in derivatives markets occurred because clearing banks were avoiding heavy regulation. Where are the next profitable markets? Heavy regualtion may mean big banks not profiting from them.

If stability does occur, then appetite for emerging markets will return. Money will not be flowing to the Anglo Saxon economies from Asia. How can these global forces be contained? There's not a clear answer I'm aware of. One things for sure pressure on a return to profitability will see the major banks again failing to address risk with their investments in the emerging markets. It'll be a very dangerous place in the next few years if some old style capital protection is not forced on the major US & UK banks. Without this boom and bust is back on a much more rapid time-scale.

Next year should see the return of heavy regulation on high street banks. But it won't so we'll be facing a much bigger crisis when China faces up to it's bad debt.
What's gone wrong at Charlton? 8:26pm on 19 Mar 2009 Curbs spent 8.5 million pre-season 2004-2005. At that time outside of Liverpool, Chelsea and Man U that was the biggest outlay of any club in the prem. It's a complete fallacy to say Curbs did not spend money.

Curbs decided to spend the majority on mature, high waged players. He avoided youth that was cutting it and went for names. The wage bill was inflexible under Curbs, he always wants to bloat it not look at the return he gets from it. That was his MO at West Ham. He still does not see the danger in signing reams of players with suspect injury records on big wages. Is it good to sign players who barely play ten matches in a season?
Would Palin have done better? 8:16pm on 19 Mar 2009 Who is Noemie Emery? Another fine example of neo-con journalism. The satire involved in her piece is as balanced as a AIG CDS. Crude subjectivity from the liberals and cold hard folksy facts from those real old neocons. I'm surprised she didn't tie Obama to Al Qaeda

I'm exasperated by Obama's lack of attack on the regulation of Banks. Light touch regulation does need to remain but not at our retail banks. But hey this is a problem bubbling for forty years since Milton Freidman blew away Keynes. He was probably right in many ways. But did the scandals at Bankers Trust, Tequila Effect, NatWest Markets, LTCM and the DotCom farce come down to Obama? Now the biggest ever abnegation of risk, brought on by neglect and the government pumping money into every failure, is not in any way Obamas fault.

So in two months the guys blamed for a 2,000 drop in the dow. But hang on, the markets are now just about near to lows set in the last few months of Bush's administration. The markets say Obamas almost as good as Bush, what they say is right? Just about everything she says is hearsay and meaningles minutae of subjectivity. Maybe with QE we would be better off with pork barrel Palin, and her massive increase of debt record. Is that a fair record? Probably not, but holds more interpretative truth than any neocon's bile.
Red capitalism 09:37am on 03 Mar 2009 In one respect China has a significant disadvantage to the West, and that's a bad loan book both domestically and internationally bigger than anything ever seen. It's hard to see it in Shanghai because there's so many bad skyscraper, unless someone local explains many of the property failures. Get out into the regional capitals and walk outside the CBD and the empty shells are where plenty of bank money went.

Still economists say China will overtake the US in 2015. And well it might on paper but with huge poverty open to massive social-crisis if bad debt collapses many companies and banks.
What's gone wrong at Charlton? 1:20pm on 24 Feb 2009 Les Reed was head coach but the board and Varney stated that he was the boss and they had the right management team in place. Very mixed messages and certainly not one that intimated Reed was a caretaker dependent on performances or indeed that the club were considering other managers.

Fleetwood has not been tried as he has been very poor at Brighton. From within the club very little of anything is coming out on him. Shame that he signed for a club who had no intention of playing him in his first season. Indeed that was the stupidity of Pardew too many players deemed not ready. Sure buy for the future but buy players who can turn in a performance even if they're developing.

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