Lex – who is being stuffed?

Lex writes about the proposed Lloyds capital raising –  the world’s largest – but misses the opportunity for deserved excoriating criticism on behalf of the poor bloody individuals who are the being plucked and stuffed by the fund managers gifting  their savings.

Here is a quote from yesterday’s “HM Treasury – Government Announcement on Banks. Implementation of Financial Stability Measures for Lloyds Banking Group and Royal Bank of Scotland”:

 “The remaining risks are better shared with private sector shareholders – for Lloyds, the private sector will provide £15bn of capital and for RBS, the first loss on the remaining £282bn of contingent liabilities has increased to £60bn. “

But the ‘private sector’ in this instance comprises mainly the same taxpayers who will now take on additional Lloyds liabilities via their pension and savings products which will be stuffed by their managers with unwanted bank shares. You can be certain that the individual pension and savings participants will not be asked if they want to support the capital raising, and if they were,  it isn’t difficult to imagine the answer.

Why would a rational investor buy new Lloyd’s bank shares?  There is no visible or certain investment return. On any criterion the rights issue from Lloyds would normally be considered a high risk investment.

The truth is the rights issue is an indictment of the present financial system, whereby a minority of savings controllers can misrepresent the interests of the majority participant investors , the disenfranchised suppliers of capital, to acheive their own narrowly profitable ends. See also https://fabooks.wordpress.com/2009/09/01/the-disenfranchisement-of-capital-%e2%80%93-how-the-city-stole-your-vote/

Bun rating: 100% the world’s largest stuffed bun


Lex it’s the capital stupid!

Lex writes today about ‘Executive compensation’.   But ‘Executive compensation’ is to income, what Harry Potter is to literature.

Traditionally and in most people’s minds, income is earned from employment to fund current consumption, though some may be deferred (savings).

Anyone fortunate enough to have experienced a steady ascent from average income to say, ten times average income, will have discovered that income has limitations.  Each increase results in a diminishing pool of useful spending options.  But the main limitation of income is that you have to keep clocking in to get it.

The acquisition of and ownership of capital opens up many more possibilities.  Capital is necessary to live comfortably and be free of work. Capital buys status. Capital buys power and influence. Capital buys security.

The open goalpost financial culture has led to a new shadow industry.  This industry’s objective is the application of entrepreneurship by employees to find increasingly inventive ways  to extract capital from it for their personal use.

Lex suggests that shareholders can vote for change.  Lex : ‘it is helpful to establish principles on which shareholders can act, especially on dubious practices like golden parachutes, tax gross-ups, and personal perks’

But shareholders, in the real world Lex, are effectively disenfranchised (see my thoughts on this at  https://fabooks.wordpress.com/2009/09/01/the-disenfranchisement-of-capital-%e2%80%93-how-the-city-stole-your-vote/

We really need you to sharpen up – we private shareholders, who own most of quoted UK PLC – need a champion, not a lackey.

Bun rating, 95% dough, meat extracted 5%

Is Lex a lawyer?

Expressing an opinion can be risky, events may prove you wrong.  However. this can be avoided if you include most of the available opinion options in a commentary.

Welcome to the “no comment” commentary or:  “We might not always be right, but we are never wrong”

Here is my commentary on today’s Lex piece on Baidu. I have italicised the tentative interpretation of events, the sum of which is zero.

 “In the wake of the storm over “trading huddles”, there are new mutterings of investment bank tip-offs to preferred research clients. Consider Baidu, the $14bn Chinese search specialist listed on NASDAQ. The stock had an uneventful summer, beginning July at $301 and ending August at $330. At about 10am on Friday September 4, it suddenly surged against a flattish benchmark. By 1pm, the stock was up 5 per cent. Over the next three trading days, it continued to rise. On September 11, Goldman Sachs upgraded earnings estimates, with a higher target price – $475 – than any of the 23 brokers on the street. On Wednesday, Baidu broke through $400.

Other factors than a trading huddle might explain Baidu’s ascent. After the market close on September 3, Dow Jones Indexes announced that, as of September 18, Baidu would be one of three stocks promoted to its Bric 50 Index. On the morning of September 4, Google – Baidu’s big rival – also said its president of Chinese operations was stepping down.

Neither event provides wholly satisfactory explanations. The two other stocks attracting new demand from tracker funds, Brazil’s OGX and India’s Jindal Steel & Power, jumped less on September 4, and have since risen half as much. And while investors may be extrapolating gains for competitors at Google’s expense, China’s other leading US-listed portals, such as Sohu and Sina, have been left in Baidu’s dust.

Stock price moves, alone, are inconclusive. More decisively, Goldman says it had no “huddle” on September 4, when Baidu began to rise. Still, as the least blemished institution throughout the crisis, it remains an obvious target for grievances over some of the shady practices that fomented it. The vampire squid will be harpooned for a good while yet.”

 Bun rating – 98% dough, 1% meat, 1% grease.

The inflated elephant in Lex’s room

I do not believe there is an active conspiracy, but I do think that the collective power of the large and amorphous city establishment (this includes the Financial Times), consciously and unconsciously limits the agenda for discussion, to one which is survival friendly for the tribe.

The FT depends upon financial advertising and as a consequence, must align itself with the culture and interests of its City-centric readers otherwise they would stop buying it. You are no more likely to find a serious analysis of the disaster caused by the shadow banking system, together with an argument for its dissolution in the FT, than an article in the Meat Trades Journal promoting vegetarianism.

This year Britain’s central bank has set UK’s lowest central bank interest rate for 315 years. As a consequence, since March, asset prices have commenced a new spectacular inflation.  This phenomenon and the tsunami of central bank created credit accompanying it, has rendered any conventional analysis of variable such as earnings per share and profit ratios (see Lex most days), irrelevant.

That is the news Lex!

No bun rating today, the elephant ate it.

The disenfranchisement of capital – how the city stole your vote

In the UK people struggled for centuries to achieve universal suffrage in 1918. The right to vote for all is a key component of democracy.

In the UK today, the right to vote to elect MPs is barely relevant. The main party’s preoccupations have become fossilised arguments about relatively trivial changes in the funding of public services and taxation. Parliament and its activities have become marginalised and unconnected to many of the modern levers of power.

According to Marx, alienation arose when workers sold their labour power to the capitalists who thereby became the owner of the labour process; the product of the workers labour thus became alien to the worker.

The modern day equivalent is the alienation which arises the when the nowadays, middle class worker, is disenfranchised from the rights of his capital or savings as he passes them to the city establishment to manage in return for a modest money rent.

The financial establishment are the monopoly owners of the power that is attached to this capital. The power is derived from the separation of the vote which is stapled to capital in the hand of its owners, and the concentration of that vote into blocks wielded by the city establishments in their own interests – primarily their own enrichment and perpetuation.

Every share, bond and deposit, carries the right to vote in varying circumstances. Very few individual investors bother to vote and many obstacles exist to deter them if they want to. The majority of votes are exercised by the city establishment in pursuit of their own interests, which are not the same interests as the interests of the owners of the voted savings.

The capital power and the rights which run with it, are thereby expropriated by and for the benefit of the financial establishment.

Key policies and decisions over the economy are determined by the financial establishment, whose power is derived from control of people’s capital (savings, pensions, insurances bank deposits, equities etc).

There is no conspiracy; it is the way things have developed as savings capital has increase enormously over the past fifty years, and political awareness of this development has not been encouraged.

This appropriation of votes is reminiscent of voting abuses that The Reform Act of 1832, set out to abolish. Even the labour party has abolished the union block vote at their conferences because it was undemocratic and unfair, but such is the power of the financial establishment that party manifestos are silent on the issues which determine the shape of people’s lives.

How is this going to change?