Israel; Recalcitrant, Recidivist

In April the King of Jordan flew to Washington DC to meet with President Obama.  The hot subject matter; peace in the ME, Israel, Palestine.  Early May the Pope flies to Jordan and breaking with precedent, HRH King Abdullah greets him at the airport and holds private meetings.  On 10 May, the Pope flies to Israel to meet with Netanyahu, Israel’s new PM of a shaky coalition.  In Mid May Obama flies to Egypt to meet with President Mubarak.

In April and May the US President’s Chief of Staff Rahn Emanuel, has been making some clear and concise, and very public statements about the future of the “two state” solution for the West Bank and Palestine.  These statements do not harmonise with the new Israeli Government and their views on things generally and specifically in the West Bank and Palestine.  The new US Administration has been discouraging an earlier meeting with Israel for several reasons, the new Israeli Government took some time to form as a fragile coalition as it is, and for Netanyahu to piece together a policy regarding Palestine.  They have now emerged as having “no policy”.  They want the status quo to prevail which, as all thinking people will tell you, is just NOT on.  A solution is sorely needed and the only solution is a two state policy and Israel MUST agree to it and make some positive steps towards implementing it and with some degree of haste.  So the Obama administration has delayed a meeting between Obama and Netanyahu until the behind the scenes diplomacy has had a chance to work and believe me, “it is being worked….”  From King Abdullah, the Pope, President Mubarak, Obama (I would also like to add Tony Blair but he seems invisible in his diplomatic role such that his presence is not being felt or is impotent in the role given his past failures and alliances with the Bush regime).  Let it be said that BEFORE Obama meets with Netanyahu, some concrete pieces of the puzzle needs to be put in place and so far, there is no firm date for a meeting.  Obama will soon go to Egypt and it seems everyone is putting in a large effort to come up with a stable peace plan for the ME and all the odds are lining up against Israel politically.  The only stalwart, recalcitrant player here is Israel who NEED to align themselves with a policy that paves the way to real changes on the subject and not the same old roadmap bullshit emmanating from the Bush regime for the past eight years!

The USA funds Israel to the tune of between USD 2-3 billion per year and this year like every other year, the Israel budget is in deep deficit, and maybe this time Israel should NOT expect the USA to just give them money again, especially if they fail to endorse a program leading to a two state solution and to end this conflict with Israel’s neighbours.  King Abdullah has been doing an exemplary job as a peace advocate visiting President Assad in Syria and Lebanon and others to try to bring this to an amicable conclusion.  Surely the ONLY recidivist, recalcitrant player is Israel.  If this can be pulled off; King Abdullah deserves the Peace Prize for his valient effort, but lets not jump to the last page in the book yet.  There is much to be done first and Netanyahu needs to be read the riot act by President Obama and Israel MUST agree to long term, sustainable changes in the region to ensure the long term survivability of Israel.  When you look at a map of the region and you look at all that has gone on since 1947, you can ask what is the common denominator here?  What, or whom is the recalcitrant player here; the answer is abundantly clear, the problem is, none other than Israel.

The Deepening Financial Crisis

What we have seen so far, fuelled by the US mortgage situation and the underlying greed of the US Investment banks (plus Swiss and UK Investment Banks’), is not the full measure of events.  It is merely Act One.

The US and UK banks were part of the first wave of problems which have been well and truly felt in the US and the UK and to some extent in Europe and elsewhere because of course, all the markets are linked and the banks all trade with one another and pass their trading books from time zone to time zone in the course of a trading day; no one is exempt from the ravages sparked in the US investment banks by the sub-prime mortgage crisis.

The next wave will reflect the realities of a shrinking global economy.  As the downturn bites, it in turn impacts on slowly weakening and deteriorating industries and economies.  As demand flattens and declines and as the rate of decline accelerates into a more rapid decent into…… a deeper and longer, sustained recession which may even be in future characterised as a “depression”.

We are now seeing that many of the US banks in particular are quite heavily provided for, in terms of allocating funds for their non-performing loan portfolio caused primarily by the sub-prime mortgage situation.  NOW, in the second wave we will see the better credit exposures held by the US banks start to fall as these companies, businesses and industries start to suffer as a result of a collective slowdown of the economy and of course everything is “linked” inexorably together.  In the European market, many of the banks have not been forced (yet) to adequately provision themselves for their growing non-performing loans and some of them are sharply under-provided.  This will have to be corrected in the short term AND, there must be a continuing recapitalisation in the EU banks as this deterioration evidences itself more and more and it must be an ongoing provision and recap demand.  The lack of investment from the equity markets will reflect a lack of appetite (observe what happened in earlier recap’s in the UK which just went down the deep, dark hole).  This leaves the only other resource for fresh capital; Government!

The German banks, French, Spanish, Dutch, Belgian etc. must all brace for another heavy round of ‘cap in hand’ to their respective Treasuries for a replenishment of their “written-off” capital.   The refill will very likely come with strict terms and conditions and the banks’ will not welcome the fresh capital with alacrity.  This second wave is less fuelled by the sub-prime mortgage situation than the continuing deterioration of previously thought to be, the better quality credits extended by the banks’.  The economic downturn and recession will increasingly cause the better loans to become marginal, and then fail.  It soon will become a self fulfilling prophecy that the economic slide worsens as the curve turns sharply down and the economy falls in on itself.  The extent and severity of the economic morass yet to be experienced knows no bounds.

What this may mean and lead to is some degree of “civil unrest”.  As the world economies turn down, unemployment becomes a more prominent feature of recession and with millions of people unemployed in Germany, France, UK, USA, Japan and possibly China, there will be some degree of dissatisfaction from the masses who will look to their economic leaders, their government leaders and administrators for answers and solutions to this growing problem.  Do NOT be surprised when you see mass marches of people in the streets in Germany, France and the UK as massive and growing numbers of unemployed with no serious prospects of employment and dwindling economic resources from the goverment to make dole payments to support the growing numbers of those who “need”.  The only solution may be for Governments to employ the people to work on infrastructure projects; roads, bridges, railways etc as was done in the 1930’s as part of a program to resolve the economic situation at that time.

US Gov Embraces Nuremberg Defence

The Nuremberg Defence is a legal argument essentially arguing that the defendant’s were only “following orders” of their superiors.  So, please inform all of us WHY those US interrogators who ostensibly “tortured” those incarcerated at GitMo and elsewhere that this argument stands when CLEARLY this argument has been put forward and dismissed before:

“The fact that a person acted pursuant to order of his Government or of a superior does not relieve him from responsibility under international law, provided a moral choice was in fact possible to him.”

The United States military adjusted the Uniform Code of Military Justice after World War II. They included a rule nullifying this defence, essentially stating that American military personnel are allowed to refuse unlawful orders.

http://www.huffingtonpost.com/2009/04/16/obama-admin-no-charges-ag_n_187837.html

The US Gov seems to be adopting the Sargeant Schultz philosophy; “I see nothing” and by ignoring the basic fundamentals argue that “it is OK” to torture prisoners at GitMo and elsewhere??

These US Government sanction acts of torture and “other criminal activity” including prison ships, extraordinary rendition and other acts of illegal removal/transport of people/suspects, many of whom have been released, never tried or convicted thereby exonerating them and therefore exacerbating the illegal activities of the US Government and their agencies and various operatives who have actively and wilfully engaged in these illegal torture activities around the world.  This should spark hundreds of lawsuits against the US Government for their illegal actions.

Another Day, Another Shonky (Barclays) Deal

Another day, another shonky deal.  This time by the Barclays Banksters (again)!  Barclays, ever desperate to repair it’s ailing balance sheet and ever mindful of the need to line their pockets on the way through have done it… again!  This time they have shifted GBP3.1 billion of assets off the balance sheet to CVC Capital (Citi Venture Capital) and they have largely funded it to the tune of GBP2 billion and on the way through…. wait for it… the senior Barclays Bank management have managed to pocket GBP150 million!  Not bad for a days work and CVC are also sneaking in GBP34 million in fees.  Varley and Diamond must be smiling as they sip their Krug!

Best of all, they are billing it as a win for the ’shareholders’?!  Somebody has to put a stop to this madness.  Where are the newly strident FSA when they are needed?  Even though Barclays’  have managed to cleverly stay out of the pocket of HM Treasury, they are still stealing from the shareholders by lining their pockets unashamedly on the way through.  Have these guys got no moral scruples whatsoever?

Raising GBP3 billion is far from enough however as some ‘experts’ argue that Barclays needs another GBP 15 billion or so to get the balance sheet ratio’s in line with their peers.  This means we can all expect to see more, new, creative deals from Varley, Diamond & Co to line their pockets enhance the tier 1 capital of the bank.  This is all for the betterment of the ’shareholders’…

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5129088/iShares-sale-nets-Barclays-staff-150m.html

Shonky – def -  http://www.urbandictionary.com/define.php?term=shonky

Avarice & Hubris (still) Flavour of the Month at Barclays Bank

Poor Bob Diamond had to accept a pay cut to GBP17 million pounds for FYE 2008.  I am sure he will be struggling to continue the dom perignon as  a part of the daily routine.  Poor Bob Diamond!

Barclays have done everything they can to avoid dipping into the public purse (so far) and Varley and Diamond; the two key operatives are desperate to ensure they can maintain their extraordinary remuneration in light of the public displeasure of such a smell of the entrenched corporate greed in the Banking sector.  The scent of money however is too strong and the addiction too alluring to ever consider leaving some on the table for the other stakeholders!  Ever alert to market sentiment, Diamond has avoided calling his excessive remuneration (only GBP250K was actually “salary”) a “bonus” because of the smell but instead has re-tagged the payments, in his infinite wisdom as “incentive” payments.  A rose, is a rose, is a rose.  Both Varley and Diamond need to retire urgently sans the hefty golden parachutes, pension plans, bonuses, stock options, gratuities, free office/sec/travel etc etc etc.  Their time has to come to an END and such abuses must be curtailed; it is NOT socially acceptable any longer.  WHERE is the voice of the shareholders?!

http://www.guardian.co.uk/business/2009/mar/24/barclays-diamond-pay-cut

Everybody’s WRONG (except me!); The Economy STUPID

It seems all the economic geniuses out there are determined to have a spending, consumer led recovery.  The reality is, this will not work.  The reason we are in this mess in the first place was the “spending” on credit in ‘I want it all and I want it now’ generation.  Almost all of the spending in the decade leading up to this “mess” we are in was done on credit.  Few if any waited, saved or put off purchases until they had the money to pay for them (housing maybe an exception but with housing a hefty deposit is prudent).  Instead, bombarded with sales and marketing gimmicks and aggressive “me too” type programs, consumers were led into making purchases under the guise of buy now or risk rising prices and pay more later.  The “no payments due until 2 years hence” etc and the constant bombardment on TV touting gadgets, cars, TV’s, houses, appliances, holidays… you name it.  Do it and do it NOW!  And for the most part, consumers, like lambs to the slaughter did exactly that.  Now what?

Here we are today steeped in this mess fuelled by the conspicuous consumption habits of the past and the economic giants are encouraging us to “spend”!  THAT is what got us into this mess in the first place.  This global recession we are in (let there be no doubt that we are in one) is going to be long and deep and wide.  SPENDING today on the continued path of the past is going to make it worse.  SPENDING now will make it more difficult to exit and probably make it deeper and prolonged.  The reality is we are going to be in a recession (maybe even a depression along the lines of the 1930’s) so get ready for it and that does NOT mean spending; it means cutting back on spending and saving as much as you can, as quickly as you can.  Reducing consumption, reducing your debt load and hunkering down for the recession.

I know the arguments the economic giants are saying; spending will give us a consumer led recovery.  NOT this time.  The confluence of factors in aggregate are too severe and too engrained to be resolved with “quick fixes”.  It took a decade or longer to get into this “mess” and we are not going to get out of it quickly.  If consumers stop spending and reduce debt, there will be consequences, some businesses will fail (some already are; the car giants etc) and others must pare back for the downturn and survival is the key for these businesses and SME’s not growth and not sustainability; SURVIVAL!

The banking system is in an unprecedented mess, and it will take years and years to correct, if ever and certainly NOT in their current form.  Instead of the UK Treasury and the USA Fed pumping billions, hundreds of billions into failed and failing banks, they should be creating NEW banks that are clean, debt free, problem free and willing and able to lend.  A portion of the $500 billion stimulus package could be injected into a NEW banking group with one clear mandate; to extend credit facilities to (worthy) borrowers; companies, SME’s, and individual borrowers who measure up to acceptable, stringent credit standards.  And meanwhile, the banks’ that continue to haemorrage can be nursed through the crisis of “their own making” over many years and perhaps decades until they get back on some firm footing.  It is totally senseless and a waste of money for the UK and US Governments to be pouring huge funds down the deep dark hole of the big banks’ because that capital is GONE!  It will never come back and it will never be used constructively to build any business.  IT is simply GONE!  But the liability the Government Treasury’s incur in borrowing the money to pour down the deep dark hole will remain on the Government balance sheet as a “liability” which MUST be paid for, and by whom?  By the lowly taxpayers and citizenry of course, who else?!  This action to “spend” and stimulus packages being talked about far and wide WILL NOT WORK.  It will only serve to make the whole thing worse, and what is EVEN WORSE if possible is that it will take five years of spending UNTIL the geniuses realise the error of their ways.  When the penny finally drops and “they” realise, hey, this is not working, it will be way too late as the economies of the world will be very deep down and take much longer to recover from the mire, hence the “depression” we seem inevitably headed to.

We are on the brink right now, today; March 2009 of severe consequences of several Eastern European “Failed states”.  The Western economies are borrowing heavily NOW to fund their many and various “stimulus packages” and there is little enough capital available for that leaving many emerging market countries and Eastern European countries “unable” to access the capital markets because all the credit has been offered to the better borrowers leaving NOTHING left for them.  This will precipitate an economic  collapse of several “failed states” which will have a snowball effect on others causing HUGE problems beyond the help of anyone including the IMF.  I expect some Eastern European countries that are already hurting to start to fail and cascade into an unimaginable mess beyond expectation and will lead to considerable social unrest in pockets and may spread systematically across Europe.  This will be an inevitable tragedy.

Royal Bank of Scotland’s Stunning Results

It is amazing that RBS continues to astound with their unprecedented financial performance, this time posting a stunning annual profit (LOSS) FYE 2008 of  (GBP 40 billion) (statutory loss).  They will NEED to raise yet MORE capital to comply with regulators and capital adequacy requirements and after their earlier rights issue of GBP14 billion where the shareholders were “taken to the cleaners” there is NO appetite for any institutional investors to take up any more equity for a very long time.  This means there is only ONE source of capital now and that  is H M Treasury.  It is expected that the resulting shareholding by the UK Government in RBS will ascend to about 95%.  Nationalisation is a done deal.  Lloyds is next, wait for it!

What does this do to feed the avarice of the City’s bankers?  Given the current RBS feud ; “he said, she said…” over Sir Fred’s entitlements at the time of his exit and (not so) confidential telephone conversations and well publicised letters exchanged, it appears the fight is far from over.  It is a nice treat to be granted a GBP 693,000 annual pension (for life) as a reward for outstanding achievement in the field of……. redefining, and leading failure to new heights.

Those banks who were cunning enough to avoid dipping into the public purse (so far) like HSBC and Barclays Bank will be squirming in their seats as their avarice has not gone unnoticed.  Certainly HSBC is contemplating going to shareholders for a capital top up and that should be treated with scepticism and of course we all know the “managed” placement by Investment Bankers to Middle Eastern investors on outrageous terms and conditions will not protect Barclays in the long run because they too, will ultimately NEED to dip into H M Treasury to continue their existance, it is just a question of time.  When it happens say goodbye to Varley and Diamond who have for years been lining their pockets at shareholders expense with outrageous salaries and bonuses and other perquistes.  A look at the Barclays annual report will reveal the depth of their avarice laid bare.  So far they have done “everything” within their power to protect their access to the golden egg, alas it can’t last.  The public, the regulators, the shareholders and even SOME Boards of Directors are on to you!

UK Banks’ Reporting Season

Barclays Bank is first out of the chute today announcing GBP 6.1 billion profit FYE 2008 after “significant” write downs!?  HOW significant needs to be asked.   Varley and Diamond have gone to great lengths to stay out of the pockets of the UK treasury (but not sure if they can in the long run).  Between these two ’schemers’, they have sold the farm at great cost to the rest of the shareholders to Middle Eastern investors in a form that preserves the existence of Varley and Diamond, at least for now.  It is an understatement to say the shareholders broadly speaking, are not happy.  Varley and Diamond DESPERATE to stay out of the pockets of the UK treasury for as long as possible to protect their (deteriorating) professional  integrity, and of course their precious and outrageous bonuses and of course their jobs!  Had Barclays gone in the same direction as Lloyds and RBS; they would both surely be GONE by now.  The best thing that ever happened to Barclays was to lose the (friendly) bid to a hostile bid from RBS for that much troubled asset (??); ABN AMRO Bank.  This leaves RBS of course with the mess resting firmly in their stable and to say the least it has brought them undone.  Although RBS is yet to report it’s FYE results, it is widely expected to be around the GBP 28 billion mark (loss!!).  Of course RBS is choking on their own misdeeds but also those evidenced following absorption of (a goodly part of) ABN AMRO bank (while Fortis is choking from absorbing the rest…), plus RBS have huge problems in their USA business unit; so the RBS problems are three fold and Barclays have (only) one!  I would put it to you that Barclays are so vociferously arguing against the accounting rules; specifically the “mark to market” requirements of IAS 39, that it seems obvious to all but the uninitiated that there are further problems in the Barclays portfolio and they are glossing over it on the expectation that it will “come good” (someday).

The huge (global) brouhaha about executive bonuses at banks’ is also causing some consternation at Barclays because Varley and especially Diamond have been at the extreme end of the bonus payments in recent years with Diamond receiving tens of millions of dollars for each of many past years.  THIS year however, “we will all be watching” to see how much of the bonus will be paid to Diamond as the world is revolted by bankers excesses.  Diamond is busy even today in the press:

http://www.iht.com/articles/2009/02/09/business/barclays.4-426377.php

“defending” bonuses to senior executives at Barclays (read: especially bonuses to Bob Diamond!).  Lining their pockets with such indescretion will do them a lot of harm personally and professionally.  I am sure they do NOT care as their career path is rapidly coming to an end!

Meanwhile back at Whitehall, Sir Fred is going to be hauled over the coals today to EXPLAIN why and how he was able to single-handedly bring down RBS and thereby fuel the UK banking crisis.  Of course he is not alone and his boss Sir Tom and Andy Hornby(ex HBOS) et.al. will also be held to account.  A bit similar to their US counterparts were a few months ago “across the pond” which revealed the hubris of the CEO’s of Lehman Bros, Merrill Lynch and others in all it’s awe inspiring glory.

We also expect the results of the remaining UK banks to make headlines this week.  Also of interest will be HSBC who claim to be relatively strong despite their investment in high profile sub-prime lender Household Finance Corp (“HFC”).  I still think sparks will fly there, sooner or later.

I doubt that Barclays will be able to stay out of the UK treasury pockets as they will likely NEED to participate in the “toxic assets program” where they can get some protection from all those volatile CDO’s and other derivatives written at the peak of excesses.  When they do, we can all expect the END of Varley, Diamond and others as Barclays must sup at the trough of the treasury much to the consternation of the (new) Middle Eastern investors.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5697765.ece

The Dawning of the New Age of Austerity

Welcome to the dawning of a new age.  This will be marked by a decidedly different retail environment where GONE is conspicuous consumption and along with easy credit and self indulgent nature of those we “aspire to be”; it is all history.  The New Age of Austerity will be marked by an enironment where consumers will expect more and better value for money, they will buy less quantity and also less quality.  The new mantra for this age is “SAVING”.  Does anyone remember what saving is?  It is when you put money aside for some other purpose and has until now been long forgotten.

Consumers will be paying off credit card debt and cancelling many of their credit cards using debit cards preferably.  Mortgage repayment will be accelerated and “who needs to be seen” driving a flashy BMW when a Toyota will get you from point A to B without the fanfare and extravagence.

So get ready for it.  Plan for it, if you are in the top end of the luxury segment, you will see your share of the market shrink considerably.  While the wealthy will still be wealthy, and may still indulge themselves, they too will become more prudent and it will not be good to be seen “consuming extravagently” when consuming far less extravagently is de rigur.

There is already evidence of upscale restaurants closing their doors as patronage melts away.  This will be true too of high cost fashion labels, jewellery, home furnishings and extravagent holidays.  It’s OVER.  It’s been good but now it’s OVER!  Get used to it.  Discount shopping will surge and upscale shopping will sag.  Upscale stores are already closing and you can expect more of this.  You will also see retail outlets that do not offer value for money sag and eventually close.  This is everywhere; the USA, UK, Europe etc.

Saving is the new “spending”.  So if you are in the business, shift your focus sharply and NOW to cater to the changing dynamic or become a dinosaur!  Say “goodbye” to Harrods say “hello” to ALDI and Lidl.

Bank of America Management “doesn’t get it”!

Hardly surprising. John Thain, the former chief executive of  Merrill Lynch, was forced to resigned from BofA Thursday after the bank suffered USD15.3 billion in unexpected losses stemming from its acquisition of the giant brokerage.

The decision by Mr. Thain to make an earlier-than-usual bonus payout to Merrill employees, just three days before the merger closed at year end.  He paid his senior exec’s but thought hard about helping himself to $10 million and then didn’t as it would have brought a howl of protest.

John Thain has proven to be “part of the problem” and not part of the solution.  His actions, and that of others prove again and again that the system is seriously flawed, led by anguine, sardonic management who’s sole goal is to line their pockets not only at the expense of shareholders but at the risk of (losing) the business; which happened in the case of Merrill Lynch, Lehman Bros, Bear Stearns and others.  Now the sum of the taxpayers who have no choice but to rescue their failed institutions are putting public funds at risk are getting little joy but seeing the likes of Thain discarded onto the large and growing pile of failed management.

http://www.nytimes.com/2009/01/23/business/23boa.html?ref=business

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4316475/Merrill-Lynch-paid-billions-in-bonuses-before-bailout.html