finance

  • international speculators and the Belgian non-urgency (tictac tictac)

    nearly two months after the election and we still have no government - luckily just as the Dutch who will have a minority rightwing government supported by Wilders (very stable and trustworthy statesman ....)

    and everything seems as there is no sense of urgency and that the negotiators have all the time of the world playing their political games and keeping up a sense of responsiblity and seriousness while in fact nothing has happened yet

    tictac tictac tictac

    meanwhile the Financial Times and some other speculationfavoring international newsagencies publish some articles or reports targeting Belgium as the next speculative debtattack

    as the situation in Greece and Spain seems to stabilize there are no big gains there anymore

    so speculators will have to search for new targets to get the quick enormous gains without taxes

    for the moment the fires in Russia make grain the target

    and after that ?

    tictac tictac tictac

    I hope that they have already some plan to be able to form a government very quickly when the pressure really begins to mount and we will have to pay more every hour for the debt that we are already carrying

    and as the articles say, attacking Belgium has another advantage for those speculators, they are attacking the heart of Europe that wants to tax them, control them and is keen to beat them

    tictac tictac tictac

    the 15th of august is a crucial date (Di Rupo reports to the King about the state of the negotiations)

    the first of september is a crucial date (promised date for the government after the election)

    tictac tictac tictac

  • high noon and the Eurozone is holding but

    So early this morning - or late at night yesterday - after many speculations and some international pressure coming from the US and Asia - the otherwise so difficult to manage Europeans have organised their armies for the biggest fight of their lives.

    Not 70 billion but close to 950 billion dollars are ready in a fund to defend the Euro

    And Yes the European Central Bank will let its opposition fall and will buy all the bonds that are deemed necessary to buy to keep the lending rates at some normal levels

    If that ain't bluff poker with real cards (or money), than I am not sure what is....

    It is only sorry that it is really only when they are really before the cliff that those decisionmakers made some real decision that have a real impact and can turn things around. The risks for not doing enough were so high that they had no other choice but meanwhile billions of public spending money is being used and will be used to protect the Eurozone against wild speculation and rumors. Which is a pity because that money is needed for other more essential things like schools, hospitals, police, economy and so on....

    But just as with the banking crisis the worst has been prevented but the cost is enormous because of political indecision. The same political indecision that prevents us from taking the necessary decisions to prevent such a banking crisis from happening again.

    This is a fund made up of national budgets which haven't been agreed to by the parliaments (some of those countries have elections next month). THese sums will have to be cut elsewhere (more so because of a stricter control on deficit spending in the EU by the Commission). It is clear that as long as the European Union has no European bonds, funds and taxes it will never be a real 'Union' and it will always depend on the 'goodwill' of its members (and their electorates).

    The money that is printed to spike up the fund will have to come from somewhere.

    They used an emergency rule (article 112 of the Lissabon Treaty) that is beyond democratic control. In the US there was no democratic approval before of the dollar_euro swaps. (Yes the US federal bank has thrown a lifeline to the Euro).

    It seems that the risk is not gone, it has only gone to a much higher level and so the question is if the speculators will want to lose so much money or just turn sides and speculate that everything will go positive again. There is enough room for that as the losses and 'risk percentages' were enormous last week. If one says that the market is euphoric, that is because they are making money doing  nothing, just by changing sides.... for now.

    It is also clear that they have thrown everything on the table that they had or could do for now. If they want to do more they will have to reform the European Union and the Eurozone and limit the possibilities of speculators. This is much harder to do - especially if their bluff will work .... for now.

    We as citizens and productive firms will pay the price whatever the scenario.

  • tomorrow is decision time for the Euro

    So since friday the European finance ministers and some other important leaders and decisionmakers of the European Union and its main countries are in Brussels trying to find a strategy to stop the attacks on the Euro and on the bonds of several of its countries. Tonight the first signs will be visible if merely intentions and talk will be enough. Some say there is a rescue-defend fund of (rumored) 70 billions Euro but it isn't clear how solid that fund is (Great Britain has opted out for example).

    It is also clear that some solutions are also out of question, which makes it easier for the attackers to develop a strategy. No, the European Central Bank won't buy bonds from the countries under attack, No those countries won't be able to buy European bonds.

    By tomorrow morning we will know if this has impressed the more or less coordinated and impessive attack on the Euro and the position of several of its members.

    It will be Waterloo tomorrow. We will know if we are Napoleon who made some fundamental strategic mistakes and can't move his troops around fast enough or Wellington.

    Follow Bloomberg and ignore all the declarations and intentions from the European leaders-decisionmakers. This is the real stuff. Show the money, bluff your attacker away or step out of the game.

    follow the financial search hashes on my twitter account

    follow bloomberg.com

  • why computers aren't better than humans on the stock market

    If computers replaced human traders we would all have gone broke

    The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint statement that they will examine “unusual trading” that contributed to the plunge and two people with direct knowledge of the matter said regulators plan to examine whether securities professionals triggered the selloff or exploited the turmoil for profit.

    The Nasdaq OMX Group Inc. said it will cancel trades of stocks that moved more than 60 percent. While the first half of the Dow average’s plunge probably reflected normal trading, the selloff snowballed because of computerized orders sent to venues with no investors willing to match them, Larry Leibowitz, the chief operating officer of NYSE Euronext, said in an interview on Bloomberg Television.
    http://www.bloomberg.com/apps/news?pid=20601010&sid=amuDH2xqLjP8

    and even computers can make a mistake - only the impact will be enormous - even bigger than all the trader scandals together.

    So even if they are paid too much and are stinking rich bastards with no respect for anything, they are - even as the worst human beings around :) -  much better than computers.

    Or should we throw out the computers as sales agents and only use them for backup and administration ?

  • financial crisis developing as fast as trust is disappearing

    There is nothing as important as trust.

    This is the fact in business, politics, life and finance. And in Itsecurity.

    In Finance you trust someone because there is a solid base, the numbers are correct and you will get your money back (or much more). You trust that the decisionmakers will take the necessary decisions (even the hardest ones) and that they will be implemented and expanded as needed. You expect that in times of crisis they will give their full attention to the crisis and try to re-assure the markets with concrete and solid interventions.

    This was not the case in 2008.... and all trust in Fortis was gone in more or less a week and Fortis couldn't lend a dime on the market.

    In 2010 Greece lost all trust in about a month and couldn't lend a dime at a normal rate so it had to turn to the IMF. It didn't see a dime yet from that promised gold and we are still awaiting the vote in the German parliament (and the practical conditions that will be added - under German pressure).

    This crisis of confidence always begins before the real crisis develops. It is a sort of avalanche that - if you wait long enough as a decisionmaker - will become so big that you will need very dramatic measures to stop it or limit the damage. Every day or hour you wait it will only get bigger.

    The avalanche has started

    May 7 (Bloomberg) -- Overnight deposits with the European Central Bank rose to a 10-month high as the sovereign debt crisis made commercial banks reluctant to lend to each other.

    Banks yesterday lodged 290 billion euros ($370 billion) in the ECB’s overnight deposit facility at 0.25 percent, up from 288 billion euros the previous day, the Frankfurt-based central bank said. That’s the most since July 3 last year. Deposits have exceeded 200 billion euros for the past 10 days.

    “Banks simply don’t trust each other, just like in the aftermath of Lehman Brothers,” said Jens-Oliver Niklasch, a fixed-income strategist at Landesbank Baden-Wuerttemberg in Stuttgart. “Nobody knows who holds what in terms of government bonds and there is this fear of default. At least at the ECB their money is safe.”
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aOUapJwqj3dM&pos=2

  • markets fear Europe will slip again into recession

    So I thought that was over ? That we were getting out of recession and that growth was before us ? That the worst was behind us...

    it seems the worst has yet to come or that is the fear the markets have about the European economic situation

    "“It’s all about Europe,” said Tom Wirth, senior investment officer for Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “There’s a perception that what’s going on in Europe will be dragging the region back into a recession. The question is how much of that is going to be contagious to the rest of the world.”
    http://www.bloomberg.com/apps/news?pid=20601087&sid=axWZ0s9P.Fz0&pos=2"

    I know our European and national leaders are saying that it is the fault of the markets, that normally there is no reason to have such a speculative mood and that they are doing whatever is necessary to calm this and get this behind us.... or is it just talk without substance and is the market not listening anymore to talk....

    another quote that tells all

    “Europe’s policy makers have been behind the curve and there’s a risk that the ECB doesn’t do anything because they feel it’s too soon to act,” said Ken Wattret, chief euro region market economist at BNP Paribas SA in London. “But something desperately needs to be done to inject confidence into markets that are running out of control.”
    http://www.bloomberg.com/apps/news?pid=20601010&sid=a4su14RxAIeA

    Moody declares today that the banks of Greece, Italy, Spain, Portugal and the Uk are under pressure and risk.... and that global contagation in Europe is not far because they have too much state bonds that are now reduced to 'nearly' or real junk.

    show me your money or shut up

    risk is back again and so if this spreads everything is up for grabs again because risks will appear where nobody expected it.

    That the Euro is getting back to lower levels in the exchange rates is not bad for our industry. Maybe the real recovery will come from the real industry that can export and invest again without being dependent on Germany.

    on diigo you can follow business for links to selected interesting articles

  • spain can become the Waterloo of the Euro

    As has been said since a few weeks/months in the more specialised press Spain is becoming steadily the new target to test the resolve of the Eurozone decisionmakers.

    The talk about Portugal has been disgarded since last week. It is small, there is a national political agreement with the opposition and without the harsh opposition from the major syndicates about the big cuts that will be done this year.

    Picking a victim is not only based on the numbers. It is about the global context and the 'feeling' that a victim is ready to be slaughtered, taken apart, boxed into the corner, left bleeding as a shot animal,.....  It starts with some risky first movers and than over the coming days or weeks the rest follow as it becomes clear that no decison has been taken or will be taken and that there is money to be made, the kind of money that can change a balance sheet (and bonus) overnight.

    The problerm for the Eurozone is that they are making policies as it happens and that there is nothing ready - or even prepared - to help Spain if it would need that kind of help. Only Spain is so important in the Eurozone that we are not talking about the amounts the Greeks got but more than double, triple or worse.

    If they are going to wait another 4 weeks before ironing out the details and their political differences, this can become the case or should I say the worst nightmare. Because where will we get the money from ? The IMF another time ? Or also a bit from the European national budgets (needed for lots of things in these difficult times) in the hope the local populations continue to agree with it.

    Belgium will lend 2 to 3 billion Euro to Greece. If we would have to give 6 to 9 billion Euro to Spain - even during 2 to 3 years it would still become difficult because the money will have to be cut elsewhere. Even if we get it back later, it can't be used now for all kinds of measures and social security and infrastructure.

    So as long as we don't have European Bonds national governments can use at the rates of European Bonds it is not clear how this can be stopped except by an unified strong European response. Better today than  in a few weeks. Even if Spain doesn't ask something - out of pride or because of other calculations.

  • Greece has fallen, who is next

    As we previewed Greece has fallen under the pressure of the markets and has now come under control of IMF/EC even if it will still take some weeks of bickering before the deal will be closed. It is even not sure that every European country will be able to budget the money they have promised for the plan. There are elections in the Netherlands, UK and Belgium is in a deep political crisis.

    The question now is which country will be next ? Portugal seems evident and is being targeted as we speak, but Spain seems more evident as it is going through an enormous crisis. Spain's inefficent economy was saved untill now by the tourism from the rest of Europe. But as the crisis raged throughout Europe, the holidays and the sale of real estate fell dramatically.

    The problem for the Euro is that the economy of Spain is so important that in fact the Eurozone is more or less splitting into two. One group of countries (Germany) with a more or less efficient economy that exports to the other European countries without imorting much from them. The other group of countries (Greece, Spain, Portugal, Italy) don't have the same efficiency and won't have enough economic growth for years to come and will have to take drastic measures- that can lead to social unrest - if they ever want to keep up with the other Eurozone. The other countries are not sure for the moment in which of both zones they will be in the coming year.

    Italy is another candidate because of its economic problems and a looming political crisis because of a split in the governing party.

    It looks like the Eurozone will need some new economic strategy if it is going to survive. The nationalistic Eurostrategy has become an economic idiocracy because it lacks the necessary flexibiity.

  • Greece, debt and Turkey

    what do the Turks and Cyprus have to do with Greece and its huge public debt ?

    A lot.

    The military budget of Greece is secret and is huge because officially Greece is still 'at war' with Turkey over Cyprus and tens of thousands of young Greek men have to lose some years in the military to defend the homeland and the Greek part of Cyprus against the Turkish enemy.

    Now Greece will have to slash its public spending if it is so survive the crisis of confidence.

    For this it needs peace with Turkey and a solution for Cyprus. Something that is already close since months, but were neither side is going the last mile to the final solution - which is a longlasting peace

    and more budget for the Greek people for their economy, schools and social security and pay off their debts

  • 5 reasons why Greece will probably fail (risk)

    1. There was no agreement during the last meeting of the European ministers, there is only the German right to veto any plan that counts.

    2. Greece is in an economic crisis and the banks and big Greek corporations are also having trouble lending money at normal terms.

    3. The reduction of public spending that is asked from Greece is so big that it can disrupt Greece society for some time with periods of social and political unrest.Greece is still lending at double the rate of Germany and if this isn't stopped it will lead to a spiral of debt that in the end will cost more to pay back.

    4. There is only an agreement that in the first place and for the most part, the money from the rescue plan will be lent by individual countries for 2/3 thirds which is crazy because this is money that has to come from their public spending and that can't be spent on other things. In some countries this may lead to protests and political problems for the governing coalitions.The reason that the Europeans didn't want to use the cheap money from the IMF (which they gave billions of dollars last year for their war chest to help countries in need during the crisis) is pure anti-americanism.

    5. THere is no other mechanism and the limits of the stability pact are too strict to be able to come up with a normal monetary rescue operation or solidarity mechanism. At one side the Treaty of Lisban has to be rewritten and revoted by referendums to launch European bonds but at the other side there is no mechanism to push Greece out of the Eurozone without putting the Euro itself in peril.

    Investors and speculators do not look at the press conferences and declarations they look at the facts and they ask themselves. Is their line of defence and their strategy good and should I take it into account or back off ?

    With this kind of communication and non-decision it is clear that there is no reason they should back-off.

    The problem can only grow if Portugal, Spain and Ireland are also added to that list and the Eurozone is effectively broken into two.

    In fact with the strong Euro there is no Economic Eurozone anymore. It is a German economic zone.

    There is Germany that exports to and doesn't import from its neighbors and there are its neighbors which can't export to Germay or anywhere else because the Euro is too strong internationally.

    This is what happens when a monetary unit is not used in an economical or financial strategy but as an political symbol that should make us believe that we are united and strong and that we will conquer the world (and replace the dollar).

    The Euro is naked but nobody wants to tell the king.....

  • financial risk : is Greece the beginning of the end of the Euro

    Since about 6 months ago speculatio- has begun about the future or the breakup of the Euro - the political money that is the pride of Europe and is the proof that we are a continent that in fact is ruling the world instead of a weak dollar that is proof that the hegemony of the US is finished.

    But it is important to understand a few facts if one wants to understand the present crisis and the discussions that are developing around it

    * there is no European Union and no European President and in fact not even a real European policy. There is only a international coordination between 27 states that agree to coordinate certain policies in a certain matter. These reunions are presided by Van Rompuy that one calls an European President but in fact has no power at all and is not elected as such. There is no European Government but a European Commission that executes the decisions that are being made by the 27 leaders of the European states.

    * there is no European money even if one calls it Euro and it is being used inj a certain number of states. It is not really a money because it doesn't have the necessary instruments to defend itself and to coordinate the policies between states. This is the reason for which the European Monetarian Fund has been forgooten.

    * Germany wanted that the Euro would be based on the mark their national money at the time. The compromise is that the money is called Euro but that for the rest everything monetarian reflects the German viewpoints. German policymakers remember that in the 1920's and 30's Germany knew a period of political distabilisation because of hyperinflation. The European national bank which is based in Germany - by accident ? Doesn't interfere much when the expensive Euro is killing European industrial porduction by making exporting outside the Eurozone a very difficult taski indeed.

    * At the same time Germany has changed its econmic policy totally and has lowered in agreement with the unions the wage of thousands of her workers dramatically. The result is that Germany has changed from an importmarket for the other European countries to an exporter to the European countries. The reason is that they have lowered their wages so much and improved their productionprocesses so much that the other European countries have difficulty exporting to Germany. As the wages in Germany has lowered consumption have been diminishing also which makes exporting to Germany even harder.

     

  • financial risk : which banks lost money in Kaupthing defaulting

    and will probably never see it back

    http://file.wikileaks.org/file/kaupthing-claims-update.pdf

    This is the list of all persons and institutions that have made a claim, together for 40 billion dollars

    it was confidential, but that doesn't mean anything for Wikileaks - that needs your financial support

  • how we paid the speculators to become stinking rich again

    "The taxpayer is paying for the chips in the casino," the head of the German operations of an international investment bank says quite openly, but anonymously nevertheless. "It doesn't get any better." The government, he says, provided guarantees for banks like Munich's Hypo Real Estate, whose securities are now being traded on the market at a huge discount. Investment banks, for their part, have bought the securities with money they borrowed from central banks at ridiculously low rates.

    According to the anonymous bank executive, these investment banks, as well as hedge funds and major investors, expected that governments, in the wake of the Lehman Brothers bankruptcy in September, would ultimately bail out all major banks.

    Indeed, rates for bank bonds soon began rising again, and the first aggressive players in the market collected exorbitant profits. "Unfortunately, the bad bonds of the bankruptcy candidates are now sold out," says the bank executive

    http://www.spiegel.de/international/business/0,1518,638732,00.html

    Shouldn't we act on that ? Shouldn't they be heavily taxed on that ? Those guarantees and investments in failing banks are now the reason the social states have not enough money to pay for the social security costs and to help failing industries with real jobs.

  • all individual investors are duped all the time since supercomputers are there

    It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.

    Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

    These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

    Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

    And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage.

    Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.

    “This is where all the money is getting made,” said William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.”

    http://www.nytimes.com/2009/07/24/business/24trading.html

    All traders are equal but some are more equal than others ('animal farm')

  • KBC the Titanic or the Iceberg

    Some details and numbers make this question necessary

    The possible defaults for the KBC are around 22 billion Euro at least for the moment which is

    - bigger than the budget of the Flemish regional government and so the bank has to ask for help from the Belgian federal government and so its frenchspeaking counterparts. But is has no political credibility or sympathy on the other side of the regional divided Belgium because it has built its political and ideological image on the success of the 'dynamic' flanders region against the french-speaking static old fashioned regions. The representatives from these regions are quite sarcastic now and without compassion.

    - much bigger than value of the bank on the the stockmarket and even of the sum of the available capital of the major investors from Flanders. The more the value of their stock diminishes, the greater the difference.

    They have said they will have to disinvest and get their capital back to their base. They have now investments and loans in Poland and other countries in Eastern Europe and Ireland. They will have to sell some of these quite fast and so at a huge loss.

    They have promised not to restructure untill the end of this year so there are no economies to be expected from slashing the workforce.

    - it is not sure that all risk scenario's for loans are also calculated for the worst case scenario. If the situation gets worse than they planned in Ireland or Eastern Europe, these losses will become greater and loans that were safe will become 'toxic'

    After this incident in which they needed an independent outsider to recalculate the costs of some loans and because it seemed that the bank didn't inform its institutional 'investers' (the governments) in february that they will have big problems with some loans because they were not insured anymore, the governments will now have a big problem believing the assessments of the bank itself about the impact on their loans after an eventually further deteriorating situation in Ireland or Eastern Europe.

    So is KBC the Titanic just going forward strraight on the iceberg while the bankers are having a party untill everything breaks down and in which the bankers are rescued first or is KBC the Iceberg in which you are never sure what will be under the sea ? Or are they both ?

    We who believed that the financial sector was an example of controls and procedures and independent appraisals and audits are proven wrong again. They need much more of that quickly. To restore confidence and trust. First between themselves.

  • the interesting details about the KBC bank affair

    - One of the main Belgian  (flemish) banks KBC is going through a real storm since a few days and some details are really interesting

    * a total loss of credibility : they have always said that they didn't need the money, that they were safe and that the only problems they would have would only be because they had invested too much in Eastern Europe (buying local banks at prices going up to 6 times the real turn-over - probably based on boomscenario's)

    They have always said to the politicians that they were safe now and that nothing could happen and they were believed on their words. They are big bankers and if you can't believe big bankers - who you suppose are being advised by the brightest minds - who can you believe ? They are in any case responsable for an enormous amount of investments and you suppose that they act accordingly.

    The politicians have now some questions about their discourse that they don't need more outside control and rules.

    One detail may help them with that. After the official discourse that they were safe, someone in the bank had probably some doubts and questions and just wanted to be sure. So a totally external risk auditor was called in to review all the risk assessments on their investments and portfolio. He noticed the problems that set since two weeks the negotiations between the banks and the government into motion.

    It will be very difficult to regain the confidence of other banks and financial institutions or supervisors because if the internal risk assessment is so flawed that an external risk assessment finds such big problems, than what can you trust from all the things that they are saying ? The biggest problem with Fortis was that other banks and financial institutions were not willing to lend any more money to this bank untill the take-over by BNP was being presented as a solution. The same can happen to KBC if they can't assure the other financial partners that all their financial information and risk assessment is sound and correct and double-checked.

    * a bank is not a scouts group. The CEO of the bank who went on tv and was in the international press to assure that everything was fine and that the bank was one of the best in Belgium and that all the rest were rumors and speculation and that we have to trust him when he was saying this is taken to hospital shortly before the publication of these reports. So now other secondary persons have to take his role. But one thing on tv just made me bang my head against the wall (virtually). They said that the top people and directors of the bank and in higher structure were all friends and working in a friendly confident atmosphere. But a bank or an organisation like that is not a scouts group. Off course you have to work together, but that doesn't mean that decisions, facts and discussions have to take into account anything else than facts and nothing else than the facts. You aren't a better friend because you accept stupid decisions or propositions. You are heading a bank because you are responsable for the money of thousands of people and enterprises, not to form a social club for friends.

    This means that internal auditing and controls are lacking and are working in the wrong atmosphere. Friends don't send auditors through the propositions of each other.....

  • Belgium is the fourth country in the world with strict banking secrecy

    Belgium is on the list of the countries that need to adapt their very strict banking secrecy laws under pressure from the big and mighty industrial states of the world (G20). You thought it would be Switzerland ?

    No, if the police and justice or tax administration don't have the perfect court orders (and that could take years around here) they have no business asking any information about your bankaccounts.

    There is a small difference for international transactions that have to be supervised.... by the banks. If they think something is suspicious (fraud, drugs, terrorism) they should inform the authorities.

    The Belgian authorities are now thinking of adapting their banking secrecy laws to make it more flexible .... for foreigners.

    So if you are a foreigner with a lot of dirty money  on a Belgian bank you better start asking for a Belgian passport or move it elsewhere (and not Liechtenstein, Switzerland or any other offshore, look for a (near) failed state somewhere) .... in small transactions. And don't leave it on the bank there, that makes no sense because you don't get any money out of it, only risks (in that failed state).