Limited time offer, ends 17 February!

Not only have the New Year sales just kicked off in France (the dates of which are governed by legislation, an interesting curio) but you can still get a bargain for those old francs under the mattress!

You read right. Take your Pierre and Marie Curies, your Eiffels, your Cézannes and your Debussys - coins no longer accepted, navré - down to your local Banque de France and get...euros (while stocks last)! Affaire!

Who says the EFSF is illusory and circular?

Debts forgiven!  

In a scene reminiscent of the "adult toy" revenge scene from the Girl with the Dragon Tattoo the LulzSec hacker group declare their frustration with the rigidity of personal debt obligations that, they claim, hinder corporate investment in higher speed internet gaming infrastructure (“no one will be able to afford it if they build it”).   

They launch a massive and coordinated hack of retail bank computer networks across the globe erasing household mortgage records (taking the time to digitally tattoo the word "Occupied" in all data fields) and thereby inadvertently solve a hitherto intractable piece of the global debt crisis. Until, that is, lenders restore their Fukushima-proof backup catastrophe storage systems and put Mummy and Daddy back on the debt hook.


Other natural substances overlooked

Finding the “tough love” message falling, inexplicably, on stony ground Mitt "Ten Grand" Romney hires the marketing geniuses behind Rennie heartburn medicine (“turns excess stomach acid into water and to other natural substances”) to sell the austerity/debt acid message ahead of the November election. 

Incumbent President Obama, considered by many to have long drawn a veil over the “other natural substances” piece of the equation, takes a leaf from web spam methods instead with a  blitz campaign of TV spots: “Solve your debt issues quick – and in all cases just after 6 November, 2012”; “Get ready for new economic feats – shortly after November 6, 2012”; “Do you wish to have the best growth of your life starting from 7 November, 2012?”


HMRC to promise transparency invisibility on tax deals

A stunning 11^th hour inclusion in the 2012 London summer Olympics of the popular but misunderstood sport of Corporate Tax Avoidance causes confusion when the United Kingdom's collector of taxes, HM Revenue & Customs, instead of arbitrating, enters as a contestant alongside such renown unofficial underground champions as Goldman Sachs, Vodafone and Google.

All entrants withdraw when it becomes clear that the last time pure gold was used to make Olympic winners’ medals was in 1912.

It subsequently emerges that Goldman had hedged such a result by, first, persuading Lord Coe of the 2012 Olympic Organising Committee to write Event Default Swaps as a 'riskless' source of revenue and, second, then buying up the entire contract inventory.


Thank you, China - and we mean it this time

In a remarkable show of Sino-love both the US Senate and Congress pass the “Renmimbi Manipulation Appreciation Act” officially congratulating the Chinese government for its foresight in, to quote Senator Lindsey Graham interviewed from his seaside villa in Hainan (so much more affordable than Myrtle Beach), “getting the balance right between stealing our jobs, creating  massive trade-surpluses for China and then letting the renmimbi rise strongly for 2 years to levels where acquisition of our assets became a viable proposition”. 

House guest ECB President Mario “Brothers” Draghi joked (well, at least a smile was on his face) that China “should not forget to also take a look at the Euro banking system for even more overpriced asset deals”.

Pouring the drinks, China’s President Hu Jintao confesses that his country has indeed been manipulating the renminbi but that he was gratified everything worked out for the common good just like Alan Greenspan said it would.


Economic Holy Grail found! Maybe...
 

11. Thou shall buy clothes and consumer electronics

In a long and desperately awaited development, Large Hadron Collider (LHC) economists move tantalizingly closer to detecting the elusive “God’s Work Particle”. 

Formally named the Asett²⁰(bub)¹² particle it is of the mysterious “boson” type considered by incumbent policymakers key to underpinning capitalism by uniting the “capital” quark and its antiquark, "labour". The multi trillion dollar LHC was conceived to recreate the conditions immediately before the 2001 Tech Wreck and the 2009 Great Recession. 

Conclusive evidence of the Asett²⁰(bub)¹² particle’s existence is expected, once again, to be prematurely announced by the IMF in July.



(Happy New Year! )

Both cloudy

Maybe the move from analogue to digital has not been so smooth after all.

One might think there could be no doubt someone, somewhere in Olympus will serve a stretch for this. However, with the former President Toshiro Shimoyama (1984 to 1993) reportedly claiming that:

"he had no memory of any loss-hiding scheme and was not closely involved in finance at the time"

there seem to be few signs of imminent seppuku. On the other hand, recent executives - younger, sharper and fully digitised on the memory front - probably do recall paying an advisory fee of $687m. It was a little over the odds. $665m over the odds according to Reuters.

There's lots of explaining to do (can't help wonder about the auditors either) but regulatory zealots might bear in mind the long precedent pre-dating even Thurlow that:

"Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like."

But will it sell?

24 October: "NEW YORK, Oct 24, 2011 -- MF Global Holdings Ltd. (NYSE: MF), a broker-dealer providing trading and hedging solutions, has rescheduled the release of its fiscal second quarter 2012 financial results from Thursday, October 27, 2011 to Tuesday, October 25, 2011.(link)

25 October: "Strengthened capital and liquidity position. As of September 30, 2011, the company has over $3.7 billion in available liquidity, including $1.3 billion in available committed revolving credit facilities and $2.5 billion in total capital." (link)

"Over the course of the past year, we have seen opportunities in short-dated European sovereign credit markets and built a fully financed, laddered maturity portfolio that we actively manage. We remain confident that we have the resources and expertise to continue to successfully manage these exposures to what we believe will be a positive conclusion in December 2012," CEO Mr. Corzine (link) 

28 October: "By Oct. 28, MF Global tapped the entirety of two bank lines, said three people with knowledge of the matter speaking on condition of anonymity since the move wasn’t public" (Bloomberg)

31 October: (link)

 Lowlights mine.

…or at least no sovereign defaults and - presto - no problems.

Reality may be as overrated as stress test results but it tends to be expensive to ignore. €10.4 billion of expense in this case – and that’s just the price of the insurance.

The involvement of the Caisse des Dépôts et Consignations has serious ramification for French residents like me: it may put an end to my wondering about curious year end spending in the commune (eg digging up the mayoral lawn and replacing a functioning sprinkler system with a new, functioning sprinkler system). 

But so it is the world over when local municipalities are preparing to justify next year’s budget by demonstrating they really needed, and so used up, this year’s.

Still, where else can one have fun with ~€10.4 billion?

• Brokering secret deals in Libya? 
• Buying a nice little tech company? 
• Keeping up with the neighbours’ tax policies? 
• Buying a few jobs ahead of elections?

Or, most relevantly in current context, kissing it goodbye.

Andrew Haldane, one of the Bank of England's Executive Directors, illuminated the high frequency trading debate last week with this speech. It contains many gems such as this one:

"In some respects, this may sound like old news. For example, an evaporation of liquidity, amplified by algorithmic trading, lay at the heart of the 1987 stock market crash. And it is also well-known that stock prices exhibit non-normalities, with the distribution of asset price changes fatter-tailed and more persistent than implied by the efficient markets hypothesis at frequencies of years and months, perhaps weeks and days. But these abnormalities were thought to disappear at higher frequencies, such as hours and minutes. Over shorter intervals, efficient market pricing restored itself.

Recent studies point, however, to a changing pattern. Non-normal patterns in prices have begun to appear at much higher frequencies. A recent study by Smith (2010) suggests that, since around 2005, stock price returns have begun to exhibit fat-tailed persistence at 15 minute intervals. Given the timing, these non-normalities are attributed to the role of HFT in financial markets."

The implication is that price returns move more and more to their own frenetic, rhythm-less tune - not to that of any fundamental orchestra - and, given that prices have memory, may end up staining the landscape with additional fat-tail outcomes thereby creating new systemic risk.

Maybe - but it does so far more resemble a campus shooting spree by primates as likely to hurt themselves as genuine students. The goal of protecting those student ought alone to be enough to impose controls - without recourse to prodding awake the systemic bugbear.

You could not invent it:

"Libya was furious at Goldman over the nearly total loss of the $1.3 billion it invested in nine equity trades and one currency transaction, people involved in the matter said. A confrontation in Tripoli between a top fund executive and two Goldman officials left the bankers so rattled that Goldman arranged for a security guard to protect them before they left Libya the next day, people familiar with the matter claimed." (link)

God's work, baby.

(Love to see who wrote those options contracts....)

"Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like."(Edward Thurlow)

So much for the $63.8m hitherto thought to have accrued over 7 years to Galleon's investment savvy.

Pending appeal, Raj Rajaratnam did not beat a single charge of the 14 against him for insider trading. His prosecutor, the race-card trumping US Attorney Preet Bharara (how many Punjabi-born federal prosecutors were there to choose from?) said this post-verdict:

“The message today is clear — there are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have.”

Those would be rules and laws unevenly 'applied' by the US Department of Justice (DoJ).

Last August Barclays paid $298 million to settle accusations brought by the DoJ that it proactively helped Iran, Libya, Cuba, Sudan and everyone's favourite model citizen Myanmar transfer dollars hither and thither in contravention of United States sanctions. Erm, over a decade.

The DoJ examined the matter carefully and in due course concluded - like Barclays' senior managers who must have been shocked by the persistence of their underlings' law-breaking initiatives (when, of course, they found out) - that it was a perpetrator-less crime in terms of management responsibility.

But the judge, Emmet G. Sullivan, choked on that:

"“Why isn’t the government getting tough with banks?...The public looks at this and says, you know, they’re getting a free ride here...You expect the court to rubber stamp, but we can’t [yet he did, Ed]...You agree there must have been some human being who violated U.S. laws?...Can I just share a thought with you?...You know what? If other banks saw that the government was being rough and tough with banks and requiring banking officials to stand before federal judges and enter pleas of guilty, that might be a powerful deterrent to this type of conduct." (NYT article)

What, one might ask, were the uses the monies that Barclays (and earlier fine-payers Lloyds, Credit Suisse and perhaps others) so enthusiastically shuffled for its sanction-busting clients put to?

HMT minutes you'll never see...



TO: CHANCELLOR
FROM: PRIVATE OFFICE
DATE: APRIL 1 2011


INDUSTRY RESPONSE TO BUDGET'S NORTH SEA OIL TAX PLAN


Background:

Yesterday's mugging by oil industry officials of the Secretary of State for Energy, the Secretary of State for Scotland, our own Economic Secretary and the Energy Minister has forced a potentially tricky meeting upon us. BBC press coverage here and more partisan Scottish coverage here.

Lines to take:

• "Removing oil-rich North African dictators doesn't come cheap."

• Go Mother Theresa by referring to 'thoughts' of recommending to the PM that he consider additional energy levies to finance other noble causes in, say, the Ivory Coast, or Haiti. If necessary echo UN Resolution 1973: "Expressing grave concern at the deteriorating situation, the escalation of violence, and the heavy civilian casualties".

• Cite absolute necessity (to all) of avoiding accusations of double standards at a sensitive time.

A full Department of Energy and Climate Change briefing, including industry offical profiles, is expected shortly.

[...continues...]

The blogs I want to write relate to cynical UK (and French) foreign policy towards Libya; and the odds of 40-year old nuclear reactors a scant few months from decommissioning melting down. But these are topics likely to employ either intemperate language; or demand more time than is available.

So a quickie relating to this IMF release of today dealing with real estate booms:

...what matters may be not the boom in itself, but how it is funded. Policy should focus on booms that are financed through credit and when leveraged institutions are directly involved, as the following busts tend to be more costly...

and the toolkit proposed:




So simple. And yet the politics engendered by crisis regularly manage to make key participants take their eyes off the flow chart.