meek-investor

On hindsight, the surprise is that it hasn't happened more often. Last week Pierre Wauthier, the Chief Financial Officer of Zurich Insurance, tragically committed suicide . This starkly illustrates the unbelievable pressures top business executives function under. Zurich Insurance is one of the top insurance companies in the world. Recently, it has been going through a bad patch, although by no means disastrous. The CFO is often the one required to stand up before investors to explain results and is invariably the target of criticism and calls to be sacked. The circumstances behind Mr Wauthier's unfortunate demise are not fully clear, but it is inconceivable that work pressures did not play a part. His widow has certainly hinted that Josef Ackermann, the Chairman of Zurich bore some responsibility. Ackermann denied any such thing but promptly resigned as Chairman. Only a certain breed of individuals reach the top of the business world. A masochist streak, politely termed as ...

Tragedies are usually associated with Greece - a tribute to the richness of its theatre in the 5th Century BC. Over the weekend, you could be forgiven if you changed your tastes to a Cypriot tragedy. For that's exactly what has happened - albeit in the more prosaic world of economics.   These are the facts. Cyprus is another Eurozone country in deep trouble. It needed a bailout. So far, nothing unusual. A bailout was duly announced over the weekend. It was the terms of the bailout that sent a jolt reverberating through the world of economics. The EU is bailing them by about €13 bn (chickenfeed by the standards of bailout). But the conditions of the bailout are that all bank depositors would be levied a tax of between 6.75% and 9.9%. That means on Tuesday when banks opened, all depositors would lose that amount instantaneously.   The genesis of the problem is, alas, not new. Cyprus is a very small country. In boom times, it went berserk pushing its financial industry, positioni...

OK - the title is pure hyperbole. The New York Stock Exchange (NYSE) is going nowhere. But the company that owns NYSE is just being bought over. The curious part of the story is that the acquirer does not really want the NYSE, but it comes as part of the package- so he has to take it ! Here's the deal. NYSE is part of a conglomerate called NYSE Euronext. The conglomerate consists of NYSE itself, Euronext, which is a combination of three European stock exchanges and Liffe which is a London based derivatives exchange. NYSE and Euronext are ugly spinsters nobody wants. The beauty amongst the beasts is Liffe. For it is the sexy new hottie - a derivatives exchange. And therein lies the story. In the modern day casino , that is finance , equity exchanges like NYSE are worthless as businesses. Margins are supposedly low. Stock exchanges are the places where almost all companies that require capital list and that's where investors channel their savings into productive investment. One w...

Come on Argentina. How often do you ask everybody to cry for you ?  On Wednesday, a US District Court Judge detonated an atom bomb (metaphorically, thankfully), in the world of financial markets. As usual, Argentina was at the centre of it. Here is the story, with a little bit of history. In 2001, Argentina defaulted on its sovereign debt - one of the rare instances of a major country doing so. A default essentially means that a country has no money on the due date to repay a loan it had taken and tells the creditors to fly a kite. The consequences of such an action are drastic - the country immediately becomes an international pariah in financial markets and nobody would lend to it anymore. That has been Argentina's lot for the last decade, and the situation Greece is desperately trying to avoid today. When Argentina defaulted, most of its creditors got together and negotiated a "restructuring package" which meant that they would get something back at least - spread over...

Remember Jérôme Kerviel  ?  OK, very excusable if you have forgotten who he is. He was the rogue trader who almost brought Société Générale ( a reputed French bank) to its knees. This happened in 2008. Kerviel was a trader who punted like crazy in the casino, that is euphemistically called financial markets - he was making gigantic bets that involved European stock index futures. The whole thing unraveled, he was fired, Société Générale tottered and ultimately lost € 4.9 bn.   Criminal proceedings were launched against Jérôme Kerviel  and he was sentenced to prison and a fine. He appealed, and, on Friday, lost his appeal. What caught me was the quantum of the fine. He was fined € 4.9 bn, the quantum of the loss that Société Générale incurred.  A fine of € 4.9 bn ???? Kerviel has no money and is unemployed and probably unemployable. How on earth is he expected to pay  € 4.9 bn ?   This is outright crazy. The judges have fallen hook line and sinker ...

This blogger is rather vain about his English. And yet he was completely flummoxed when he spotted the headline " JP Morgan loses $2bn in egregious error " . He has to sheepishly admit that he did not know the meaning of the word "egregious" and had to look it up in a dictionary :( Trust a banker to come up with an unintelligible world - at least unintelligible to one "master" of English :). It sums up the problem neatly. The financial world has gone so bonkers in dreaming up structures of incredible and ununderstandable complexity that we cannot sit by and watch this go on anymore. JP Morgan is a well respected bank. Its governance is top class. It should be one of the models of all that is good about the financial sector. In  Jamie Dimon, it has one of the finest Chief Executives in the world. It has superb risk management systems, strengthened even more in the wake of the financial crisis of 3 years ago. And what happens - it manages to lose $2bn in  on...

Brilliant article in the Financial Times today. Dripping with sarcasm and wit. Alas its a bit technical and you'll enjoy it immensely if you have a bit of background in finance, but even otherwise its a good read.  For those not in touch with American politics or high finance - John Corzine is a former head of Goldman Sachs. He was deposed by Henk Paulson.  Corzine then became a Senator from New Jersey and then Governor. He got defeated in the election in 2010, by Chris Christie who is the current Governor of New Jersey. After his defeat in the election, Corzine became Chairman of MF Global which has just declared Chapter 11 bankruptcy.

Yet another rogue trader has emerged. This morning is ablaze with the news that UBS (a Swiss bank) could have lost some $2bn on account of the actions of one trader - Kweku Adoboli at its London office. Adoboli has been arrested last night and the details are only slowly emerging.  Nothing is proven as yet , but Adoboli might very well join his illustrious predecessors - Nick Leeson of Barings, Jerome Kerviel of Societe Generale, et al in the hall of Notoriety. Apparently the losses stemmed from the trader placing bets, using the banks'own money on something called Delta One - trading in financial instruments linked to exchange traded funds. To lose $2bn, the trader must have been trading staggering sums of money. Clearly UBS has egg on its face. Quite apart from the massive loss, questions will be asked about risk management in the bank. How could they let such a big loss build up. The question to be asked is what on earth banks are doing even indulging in such activities. They ar...

You normally associate business leaders with high intellect, sound judgment, and in general, greater ability than many of us, mere mortals. Then I read this front page report in today's Guardian in the UK. I had promised to myself that I'd stop writing about either bankers or Goldman Sachs after my last two posts on the subject. But what can you do when somebody makes a speech like that. And where does he chose to make these remarks ? In St Paul's cathedral, no less. If you know of any greater act of appalling judgement, please let me know.

Mr Lloyd C. Blankfein Chairman and Chief Executive Officer Goldman Sachs Group Inc. Dear Mr Blankfein, Congratulations on the stupendous third quarter results of Goldman Sachs, you announced yesterday. To achieve some of the best ever results in the firm’s long and distinguished history, just one year after its worst crisis, is a remarkable achievement indeed. We are writing this letter to make a humble suggestion for your consideration. As we all know, the financial crisis over the last two years has affected millions of people worldwide. We think you would agree that the financial services industry, and therefore Goldman Sachs, had some part to play in this. The United States government had to step in to provide assistance and guarantees to you last year to tide over the crisis. I would suggest that some humility and just a hint of remorse, might serve the bank well. Arousing public anger, however fair or unfair the anger may be, is not in the bank’s best interests. We suggest that y...

Last year, virtually the entire financial sector in the world went belly up. 12 months on, Goldman Sachs reports a quarterly profit in excess of $3bn . Yes 3 BILLION DOLLARS. In one quarter. Profit Goldmans is the one bank everybody loves to hate. But even by their standards, this is something. The last two quarters have seen the highest quarterly profits in their 140 year history. Now, the economics I have been taught in college was that there is a positive correlation between risk and reward. If they have made such profits, they must have taken wild risks. Just a year after coming within an inch of annihilation, only a complete lunatic would take such risks so as to make this mind boggling profit. Or else, the economics I was taught is wrong. In the post meltdown world, there is easy money to be taken. Without taking undue risks. So the reward for bringing the world so close to an abyss, is to be able to make unbelievable money by just being around and counting the cash; and the r...

Goldman Sachs, is reporting its quarterly results tomorrow (Tuesday). There is rampant speculation that they will report “blowout profits” – something in excess of $2 bn in the quarter. Remember, not so long ago, they received money from the government to stay afloat and they repaid it back recently. They were also a beneficiary of the bailout of AIG – they had significant dues from AIG which would have all been a write off, but for the government bailout of AIG and them paying their creditors like Goldman Sachs. Along with the speculation on results, there is the inevitable speculation on bonuses. Analysts are falling over themselves in predicting the size of the Goldman bonus pool. There is no doubt that Goldman Sachs made all this money by taking significant risks and managing them better. Everybody else on Wall Street envies them. Many hate them for their success. In some ways Goldman Sachs are in no man’s land. If they report poor results, the markets will kill them (remember the...