We got a nice chunky package in the mail yesterday.
I was quite excited. After all, nobody takes the trouble to send a chunky package for bad news, do they? A single sheet of paper - that's a rejection letter. An acceptance contains all kinds of inserts - contract, conditions, instructions for your first day, occasionally even a complete employee handbook. A bulky package must be good, right?
Turns out, not so much.
The package is from Blue Star, a troubled printing company in which we invested some money a few years ago. (Mind you, I don't recall anyone using the word "troubled" back then.) We bought bonds. Now - stripped to its essentials - the company wants us to trade in those bonds for new ones that will be worth considerably less. If we don't, they threaten without much ceremony, they'll go out of business and we'll get nothing.
Well, first thing to note is that times evidently aren't so hard that they can't afford to put together a 150-page, glossy, full-colour prospectus for these new and improved bonds. Mind you, it's a printing company, they probably got a good deal on that.
But something stinks about this offer. How can a company renege on its debts, and continue trading? Surely that's the definition of 'insolvent'. If they offered to renegotiate the debt, that's one thing - but this isn't negotiation, this is blackmail.
See, while we bondholders are being asked to take a scalping to the tune of at least half of our investment (and absolutely no guarantee that it won't yet be 100% - in fact, the de-ranking of our debt makes that even more likely), the shareholders aren't being asked to give up squat. On the contrary: one shareholder in particular, Champ Funds, is offering a loan of $15 million - at an interest rate way higher than we've been offered - in return for getting higher ranking among the company's creditors.
Seems to me, that's not the sort of terms you would offer if you had much faith in the company's future.
I was taught, way back in economics class, that it's shareholders who take the risks - when the company thrives, they get the profits, and when it sinks, they take the hit. Bondholders get a smaller return for a smaller risk. But that's not what's happening here. We, the bondholders, are being asked to bail out the shareholders. (Well, one shareholder in particular, but others will obviously get a renewed window of opportunity to dump shares that would be worthless if the company folds immediately.)
The company's own 'independent advisor' - KPMG - endorses the offer in the weakest possible terms. I paraphrase, but the gist of it is: "on the strength of the information we've been given, we can't be sure that this is a complete ripoff, so we don't quite have sufficient grounds to prevent it from being put".
I say the hell with it. If the company is insolvent, let it fold now. If it isn't insolvent, then it can come up with a better offer than this. Worst case, I'm willing to lose a few grand to uphold the principle that shareholders don't get to just take money from small investors.
It may seem irrational to choose nothing over something, but if the price of 'something' is that your economy is to be run by bandits - I'll take a big ol' handful of nothing, thanks.
Showing posts with label money. Show all posts
Showing posts with label money. Show all posts
Wednesday, July 20, 2011
Wednesday, May 6, 2009
"If you had to choose between saving a banker from drowning...
... and taking a prizewinning picture of the event, what resolution should you set your camera to?" - adapted from the classic question of Journalistic Ethics.
What put this into my mind? Extract from a conversation I just had:
There are some questions that you will never hear an answer to, no matter how many times or ways you persist in asking them, because the honest answer would be "solely so that we can charge you more money".
In response to my badgering, he eventually promised that the bank would pay part of the cost of the valuation. So far, so good. Now all that remains is for me to bring the rest of my cash over from the UK, to raise the amount of our deposit as necessary so that we don't have to pay any further insurance - and the bank will be a few hundred dollars out of pocket, and they'll end up making less from us than if they'd just shut up and paid up.
I bet some genius banker earned a several-thousand-dollar bonus for working out this policy, which is about to cost his bank, probably, several thousand dollars in lost profit. I really hope that person is now dying painfully somewhere, but I don't have that much faith in karma.
What put this into my mind? Extract from a conversation I just had:
"Mr Vet, you're going to need to get an independent valuation on your property before we can give you a mortgage."
...
"Mr Vet? Are you there?"
"Yes, I'm still here. I'm just trying to work out, on a scale of one to ten, how angry I am right now."
"Well, it's because you paid significantly more than the current valuation..."
"I told you, we bought at auction. There were other bidders there willing to pay that much."
"It's very standard practice for banks at the moment, Mr Vet."
"What's the point? That is the market. You can't get a truer valuation than that, that's why it's called 'market value'. What kind of valuer do you think is going to be able to tell you better than the market itself?"
"Well, the valuer is independent, they're trained to estimate very closely the true market value."
...
There are some questions that you will never hear an answer to, no matter how many times or ways you persist in asking them, because the honest answer would be "solely so that we can charge you more money".
In response to my badgering, he eventually promised that the bank would pay part of the cost of the valuation. So far, so good. Now all that remains is for me to bring the rest of my cash over from the UK, to raise the amount of our deposit as necessary so that we don't have to pay any further insurance - and the bank will be a few hundred dollars out of pocket, and they'll end up making less from us than if they'd just shut up and paid up.
I bet some genius banker earned a several-thousand-dollar bonus for working out this policy, which is about to cost his bank, probably, several thousand dollars in lost profit. I really hope that person is now dying painfully somewhere, but I don't have that much faith in karma.
Wednesday, March 4, 2009
A wunch of bankers
(One more rant. I'm sorry. I promise I'll give it a rest - just after I get this off my chest.)
Back home, the Royal Bank of Scotland has announced the biggest corporate loss in British history. That's - my bank, since it swallowed up NatWest early in its greed-fuelled acquisition spree. And last year it lost £24 billion. That's more than General Motors. Its share price has dropped more than 98% in the past two years.
Impressive as these sums are, they're barely the tip of the RBS iceberg. The truly breathtaking number here is the amount of debt that the RBS has asked the British taxpayer to underwrite: £300 billion.
Three hundred billion pounds.
It's an unthinkable amount of money. If we simply printed it out and distributed it equally to every single man, woman and child on earth, they'd each have enough to buy a brand-new DVD player.
Three hundred billion pounds.
To put it in context: it's half the annual government budget of the UK. In other words, enough to give the entire population a six-month tax holiday. It's 20% - one fifth - of the country's entire GDP.
Three hundred billion pounds.
How do you lose that kind of money? How do you get it in the first place? If you're a bank, of course, you don't - you just pretend you've got it, lend it out to other people, and hope nobody asks for actual cash. Then you write the whole thing up in your books as a record profit. Added value? - don't make me laugh. Ponzi schemes look honest by comparison.
Three hundred billion pounds.
That's over US$420 billion - equivalent to more than half of Obama's entire stimulus package, swallowed up by one company. Truly, British banks are world-class. If the British economy were steaming ahead at full throttle, such a blow would probably be enough to put it into recession all by itself. With the economy already in recession...
I shouldn't complain - as an ex-pat, erstwhile depositor with the bank, I'm more beneficiary than payer. I'm just glad I got my money out. No, the losers are people like poor ol' former CEO Sir Fred Goodwin, who finds himself jobless and probably unemployable at the tender age of 50, with nothing but his half-million-a-year pension to fall back on...
Surely - surely - the time has come to abandon the pretence that "banking" is some kind of industry. "Industry" implies a process whereby inputs of land, labour and capital are translated into goods or services of greater value than what goes in. When companies find themselves unable to do that, they go out of business, so that their land, labour and capital become available to someone who has a fucking clue about what they're doing.
None of which, evidently, happens in banking. Taxpayers, it turns out, are underwriting the losses. So where was our share of the profits?
The conventional answer to that was that banking was essential to "fuel" economic growth, which benefits everyone. But what should we conclude, now it turns out that most of that growth for the past ten years has been an illusion - that the banks have "improved" our living standards only by running up our debt? Without asking us?
As far as I'm concerned, there's only one agency that's entitled to spend my money on my behalf without giving me some kind of option to veto each transaction... and that's my government. If banks are going to be doing that, then they need to be openly and accountably run by said government.
I'm not so naïve as to think that will make us any better off. But at least it'll stop Sir Fred and his cronies from being role models. They'll still be robbing us all, and no doubt they'll still get knighted for it, but they'll be seen for the idiotic, wasteful bureaucrats they are.
Back home, the Royal Bank of Scotland has announced the biggest corporate loss in British history. That's - my bank, since it swallowed up NatWest early in its greed-fuelled acquisition spree. And last year it lost £24 billion. That's more than General Motors. Its share price has dropped more than 98% in the past two years.
Impressive as these sums are, they're barely the tip of the RBS iceberg. The truly breathtaking number here is the amount of debt that the RBS has asked the British taxpayer to underwrite: £300 billion.
Three hundred billion pounds.
It's an unthinkable amount of money. If we simply printed it out and distributed it equally to every single man, woman and child on earth, they'd each have enough to buy a brand-new DVD player.
Three hundred billion pounds.
To put it in context: it's half the annual government budget of the UK. In other words, enough to give the entire population a six-month tax holiday. It's 20% - one fifth - of the country's entire GDP.
Three hundred billion pounds.
How do you lose that kind of money? How do you get it in the first place? If you're a bank, of course, you don't - you just pretend you've got it, lend it out to other people, and hope nobody asks for actual cash. Then you write the whole thing up in your books as a record profit. Added value? - don't make me laugh. Ponzi schemes look honest by comparison.
Three hundred billion pounds.
That's over US$420 billion - equivalent to more than half of Obama's entire stimulus package, swallowed up by one company. Truly, British banks are world-class. If the British economy were steaming ahead at full throttle, such a blow would probably be enough to put it into recession all by itself. With the economy already in recession...
I shouldn't complain - as an ex-pat, erstwhile depositor with the bank, I'm more beneficiary than payer. I'm just glad I got my money out. No, the losers are people like poor ol' former CEO Sir Fred Goodwin, who finds himself jobless and probably unemployable at the tender age of 50, with nothing but his half-million-a-year pension to fall back on...
Surely - surely - the time has come to abandon the pretence that "banking" is some kind of industry. "Industry" implies a process whereby inputs of land, labour and capital are translated into goods or services of greater value than what goes in. When companies find themselves unable to do that, they go out of business, so that their land, labour and capital become available to someone who has a fucking clue about what they're doing.
None of which, evidently, happens in banking. Taxpayers, it turns out, are underwriting the losses. So where was our share of the profits?
The conventional answer to that was that banking was essential to "fuel" economic growth, which benefits everyone. But what should we conclude, now it turns out that most of that growth for the past ten years has been an illusion - that the banks have "improved" our living standards only by running up our debt? Without asking us?
As far as I'm concerned, there's only one agency that's entitled to spend my money on my behalf without giving me some kind of option to veto each transaction... and that's my government. If banks are going to be doing that, then they need to be openly and accountably run by said government.
I'm not so naïve as to think that will make us any better off. But at least it'll stop Sir Fred and his cronies from being role models. They'll still be robbing us all, and no doubt they'll still get knighted for it, but they'll be seen for the idiotic, wasteful bureaucrats they are.
Wednesday, January 28, 2009
Just call me Alex
I'm having an agreeable yuppie fantasy today.
That probably sounds contradictory. What it involves is a little window in the corner of my second monitor that shows me the exchange rate between the UK pound and the NZ dollar, and -- and this is the nifty bit -- updates itself once per minute. This window is provided courtesy xe.com, a lovely little site that epitomises the service industry ideal of doing one thing and doing it well. And, most importantly, for free.
This rate is of interest to me because I still have a noticeable amount of money in the UK, and I've been meaning to bring it over, for house-buying purposes, when the rate looks good. As I type this, 1GBP would buy me NZ$2.68159, up from $2.67496 when I first checked this morning.
Over the day, the pound has been trending slightly upwards. But every time I watch it actually make its update, the pound weakens (which is bad). It's almost touched 2.686, before dropping back again when I got too excited and began watching too closely.
This is, of course, entirely in keeping with the known laws of economics, and will come as no surprise to anyone.
When the rate hits 2.71 -- which, for the record, I don't think is going to happen this week -- I'll call my trader and finally switch over my millions from sterling. That's the agreeable fantasy part, anyway. In the meantime, however, it really is pretty exciting to watch it out of the corner of my eye.
(D'oh! Just lost another $200.)
So here's this information that, when I was entering the job market, would have been available only to braying young wine-bar-haunting gits with bicycle clips on their sleeves, whose employers paid more for the service than for the people to watch it... and today, it's freely available to anyone with a broadband connection. Today, a mere twenty years too late to make my fortune, I get to play at being a yuppie for free, without even having to take time out from my real job.
That's so cool.
Addendum (added Thursday lunchtime): So much for my powers of prediction. Today the pound is over $2.72. I'm not pushing my luck any further.
That probably sounds contradictory. What it involves is a little window in the corner of my second monitor that shows me the exchange rate between the UK pound and the NZ dollar, and -- and this is the nifty bit -- updates itself once per minute. This window is provided courtesy xe.com, a lovely little site that epitomises the service industry ideal of doing one thing and doing it well. And, most importantly, for free.
This rate is of interest to me because I still have a noticeable amount of money in the UK, and I've been meaning to bring it over, for house-buying purposes, when the rate looks good. As I type this, 1GBP would buy me NZ$2.68159, up from $2.67496 when I first checked this morning.
Over the day, the pound has been trending slightly upwards. But every time I watch it actually make its update, the pound weakens (which is bad). It's almost touched 2.686, before dropping back again when I got too excited and began watching too closely.
This is, of course, entirely in keeping with the known laws of economics, and will come as no surprise to anyone.
When the rate hits 2.71 -- which, for the record, I don't think is going to happen this week -- I'll call my trader and finally switch over my millions from sterling. That's the agreeable fantasy part, anyway. In the meantime, however, it really is pretty exciting to watch it out of the corner of my eye.
(D'oh! Just lost another $200.)
So here's this information that, when I was entering the job market, would have been available only to braying young wine-bar-haunting gits with bicycle clips on their sleeves, whose employers paid more for the service than for the people to watch it... and today, it's freely available to anyone with a broadband connection. Today, a mere twenty years too late to make my fortune, I get to play at being a yuppie for free, without even having to take time out from my real job.
That's so cool.
Addendum (added Thursday lunchtime): So much for my powers of prediction. Today the pound is over $2.72. I'm not pushing my luck any further.
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