Brian Bollen's Blog

The State Of Libya And The State Of Scottish Football: Discuss

At first glance there would be seem to be little in common between the state of Libya today and the state of Scottish football.

But bear with me. Both are in utter chaos, with delusional leaders who continue to claim that they are in charge and know exactly what they are doing, and that if disappointed followers will just keep the faith everything in the bomb-strewn garden will be rosy. Both are reaping the long-term maledicts of the greed of a small number of people football.

In the case of Libya, it is Colonel Gadaffi and his family and other cronies. In the case of Scottish football, it is the Old Firm of Glasgow Celtic and Glasgow Rangers.

The really sobering thought, for those of us who once harboured a deep love of the Scottish game, is that the country of Libya today looks to have a brighter future.

At least it has a National Transitional Council. We have the Scottish Football Association, the Scottish premierleague and the Scottish Football League. Oh, and Henry McLeish…

 

Credit Score: 12 Out Of 100

What does a credit score of 12 out of 100 say about a company?

Two words, according to the UK’s favourite credit information company: MAXIMUM RISK.

But how does a company in such a position stay in business? An easy to-the-manner-born charm on the side of the directors probably helps. But the crucial mistake will likely be made on the supplier side. Anyone finding themselves on the wrong end of a bad debt in such a situation will surely never fail to appreciate the true value of that much used but little understood term: due diligence.

Cinderella WILL go to the ball in future, each and every ball in her most magnificent finery.

Repeat after me: due diligence, due diligence, due diligence, due diligence, due diligence, due diligence, due diligence, due diligence, ad infinitum…

 

 

 

AIMA Publishes Latest Journal

The Alternative Invesment Management Association has just released the latest edition (Q3 2011) of the AIMA Journal today. Readers can download it here.   

This issue contains: 

·         Address from the CEO: No hedge fund should be designated a ‘systemically important financial institution’

            By Andrew Baker, CEO, AIMA. 

·         Government & Regulatory Affairs developments               

·         Looking under the hood

By Prime Services Capital Solutions, Barclays Capital.

No compass, no map, no idea where you are or where you are going? Welcome to Europe and have a nice day…

Newedge - Blain's Morning Porridge - August 25 2011

By Bill Blain, senior director, special situations, Newedge

All eyes on Jackson Hole. What's Ben going to say about future policy steps? As predicted, diminishing hopes of QE3 have spooked markets. We suspect today may see less than is hoped for – it will be about vigilance and willingness to act rather that outlining exactly how the Fed will cope with sustained stagnation, which makes for yet another interesting next week!

Or we could be wondering about what’s going on in Europe… the fact Helmut Kohl, a euro father figure, intervened to criticise Merkel suggests Germany is coming unraveled just as the Euro needs decisive leadership. And we could wonder what’s going to happen to the EFSF – apparently all will be revealed this weekend.

But since we don’t know what Ben will say, or what’s really going on in Germany, let’s start this morning with a tale about banks.

In the US we have the trumpets blaring the praises of Warren Buffet's calculated intervention in Bank of America, lauding his immediate profits, and roundly praising his financial acumen. In Europe we've seen Unicredit issue a €1bn covered bond issue – perhaps suggesting fears of a funding crisis are overplayed, and that markets are open and receptive to ‘fairly’ priced new issuance. Greek banks have apparently run out of collateral, but are borrowing from the ECB from ‘esoteric’ windows.

OTC Derivatives, Pensions, And The Law Of Unintended Consequences

Could the proposals to force pension funds to clear OTC derivatives centrally represent a classic case of the law of unintended consequences in action? If the low, growling rumblings emitting from the industry are as well informed as they seem to be, this might well turn out to be the case. The central clearing measures dictated from on high with the intention of making financial services safer might well in reality very quickly increase risk levels.

This emerges as one of the key issues to present itself in even the most cursory examination of the Dodd-Frank and EMIR proposals to ‘improve’ the safety of OTC derivatives, and ultimately the value of pension funds.

A Thought On Combatting The Strength Of The Swiss Franc

Here’s a thought on how Swiss sellers of manufactured goods, raw materials and/or services might find a way round the strength of the Swiss franc. Quote prices in sterling, euro and dollars, and share the pain of the currency market movements.

Prices are often already displayed in both euros and francs, so the principle is established. It’s just a question of taking it a step further.

Betting On Apple Post-Jobs Share Price

Irish bookmaker Paddy Power would make a book on just about anything, one suspects, and in the current market climate one suspects it is viewed almost as a source of alternative investment possibilities.

Paddy Power is quoting odds on what will happen to the Apple share price in the wake of the resignation of ‘legendary CEO and co-founder Steve Jobs’ due to health problems. With the share price dropping by 5% yesterday it’s clear investors are concerned by Jobs’ absence, the bookmaker says.

With speculation rife over what the future holds for the company Paddy Power are now taking bets on what the global giants share price will be at the end of 2012. With the share price opening today at $359 it is 5/2 to remain between $350 and $399.99 come the end of the year.

China’s Local Government Loans: Another Bubble?

Schroders’ head of Asian equities, Robin Parbrook, discusses the future for China’s local government debt

The numbers might look frightening, but China’s local government debt problems can be managed if its leaders proactively address them and make genuine moves to rebalance the economy.

The next five years will be crucial for China. However, it is hard to say for certain whether the country’s leadership will take the bitter medicine that is necessary to move the economy from an investment-led to a consumption-led model.

What we can say for certain is that the country must undertake a long and, maybe, painful process to deal with the issue of inflation and the extent of bad loans in the banking sector. Saying this, these issues can be managed over time if China proactively addresses them and genuinely moves to rebalance its economy.

In summary, while the numbers may be bad, there is good news – China’s starting government debt to GDP is quite low so, while the losses are large, the numbers should be manageable over time.

For more information, see attached article: Download China's local government loans - another bubble - August 2011.

 

Best Joke From Edinburgh

Newedge - Blain's Morning Porridge - August 25 2011

By Bill Blain, senior director, special situations, Newedge

Best Joke from Edinburgh: 'Choose an eight character password: Snow White and the Seven Dwarves?' [Think about it.....]

Markets remain wholly illiquid. No one wants to sell because they think prices are too low. No one wants to buy because they think prices are set to go lower. Arguing about the colour of the lifejackets on the Titanic is pointless: hit any decent bid harder than the proverbial red-headed stepchild.

What’s happening in markets? That's not a rhetorical question. Whipsaw interday moves, volatility, and general cluelessness reign supreme. I've no idea what it all means either - but, as always, I'm willing to present some delusional guesses as irrefutable facts!

For instance: bank stocks staged something of a recovery, yet credit default swaps (CDSs) on bank names continues to widen towards crisis levels? Widening CDSs tells me the debt market perceives a bank crisis is coming. Why then would bank stocks rally? Perhaps because the equity market is still hoping Bernanke is going to announce some form of QE3 at Friday's meeting. That could turn around sentiment on economic recovery, and hey-ho, markets will look cheap again.

RBC Dexia Appoints New Director In Singapore

RBC Dexia Investor Services has appointed Eric Chua (pictured) as director of business development, Singapore. It says that Chua has been appointed to help drive its growth strategy in Asia for both onshore and offshore client mandates. He will report to Diana Senanayake, managing director, Singapore.

The Attractions Of (Group) Black Swan Insurance

Group personal excess liability insurance is finding fans among hedge fund and private equity executives, partners at law firms and other wealthy individuals concerned that their deep pockets make them targets for multi-million dollar lawsuits. 

Demand for this insurance which provides protection above and beyond the limits of their other liability policies has soared in the last three years and is higher than at any time in the last quarter century, according to SKCG Group, the risk management and insurance adviser to some of the world’s largest hedge funds.

Darwin Private Equity Swoops On Attenda

Harris Williams & Co. Ltd, a global middle market investment bank, announces the acquisition of Attenda Limited (Attenda) by Darwin Private Equity (Darwin) from management and investors including M/C Venture Partners for a total consideration of £50m.  Harris Williams & Co. acted as the exclusive financial advisor to Darwin.  The transaction was led by Thierry Monjauze, Francois Morin, Bobby Virdi and Murathan Basyazgan of the firm’s technology, telecom & digital media (TTDM) group in London.

Do You Want To Know A Secret?

Global stock markets have been hit hard in recent weeks. Since August 1, the S&P500 and FTSE100 are down thirteen percent and the Eurostoxx600 is down sixteen percent. As the vast majority of professional and independent traders are losing their shirts, The Trader Meeting is claiming a 1,200% increase in viewing figures in the last three months.

The Trader Meeting hasn’t been around for long. However, its PR activists claim that this new piece of online media is starting to win significant popularity amongst the U.K. trading and investment community.

The Trader Meeting is a fortnightly online video cast produced by the Institute of Trading and Portfolio Management and Decode Films. In February 2011, Institute CEO Anton Kreil decided it would be a good idea to hold a regular fortnightly meeting of independent traders to exchange trading ideas. Due to the success of the meetings, Kreil decided to share the idea's with other traders globally, by filming it and publishing it online. 

Since the end of May, fortnightly viewing figures have gone from just two hundred and fifty video downloads to over three thousand downloads and growing. 

AlphaNorth Mandates IFDS

From Toronto we hear that International Financial Data Services (IFDS), the international transfer agency joint venture between State Street Corporation and DST Systems, has recently gone live with a range of transfer agency, record-keeping and back-office support services for AlphaNorth Asset Management and its newly-launched open-ended mutual fund, the AlphaNorth Growth Fund.

Wall Of Money Engulfing Edinburgh?

A wall of money seems to be engulfing Edinburgh, if the latest set of results from Standard Life Investments is anything to go by. The investment house, based in the Scottish capital city, says that its UK wholesale business has witnessed net sales increase of 104% to a record £1,457m during the first six months of 2011 (H1 2010: £713m). This included recording the second highest net retail sales among all fund management groups in the UK during the second quarter of 2011.1 Gross sales over the first half of 2011 were £2,766m, an increase of 90% (H1 2010: £1,457m).

It says that the top five grossing funds during the first half of 2011 were the Global Absolute Return Strategies Fund (GARS), the UK Smaller Companies Fund, the Global Index Linked Bond Fund (GILB), the MyFolio Managed III Fund and the UK Equity Unconstrained Fund. The five top grossing funds for the same period last year were GARS, GILB, the UK Smaller Companies Fund, the UK Equity High Income Fund and the Select Property Fund.

Jacqueline Kerr, head of UK wholesale, Standard Life Investments, said:

Finadium 2011 Registration Goes Live

Registration for the Finadium 2011 Conference is now live (view the agenda and register).

The organisers at Finadium say the conference is about ideas in prime brokerage, securities finance and collateral management. This event features leading hedge funds, asset managers and other industry specialists on best practices and emerging trends.

This year's topics include:

• The Great Debate: are ETFs an operational or securities lending risk to the markets?
• What matters in securities finance for prime brokers, hedge funds and their investors.
• Regulatory change: putting the puzzle pieces together.

A bank is a place that will lend you money if you can prove you don’t need it…

Newedge - Blain's Morning Porridge - August 24 2011

By Bill Blain, senior director, special situations, Newedge

Ah... joy to be back in the office. Regular readers will know my perverse delight in carnage, destruction, panic and fear. It’s difficult to be interesting about calm ordered flat markets….   

Fears have crystallised around the themes of recession, government debt and banks. To understand the likely outcomes, consider all three together. Lots of talk of the ‘new new’ long-term economic reality, the likelihood QE3 will be anointed at this week's US Jackson Hole summit (although many analysts say he won’t do it, there is not much else up Bernanke's sleeve), and pundits telling us this all represents a long-term investment paradigm shift (whatever that might mean or be).

Facts are: markets are thin, volumes (aside for auto-ex equity programme trades) are abysmally low, and fervid imaginations panic easily. But since the summer holiday season finishes this week - what does the September re-opening hold? More of the same but with extra hot sauce, I suspect…

Let’s start with the banks. They have been spanked back to 2009 spreads. Analysts are struggling to find anything positive to say. Bank of America CDS widened through the 400 panic-level y'day (before staging a come-back – perhaps on rumours of a JPM/BOA takeover/merger (denied by everyone)). If you want statistics about how much European bank stocks have tumbled in recent weeks – it’s all there on BBerg.

July Sees Hedge Fund Net Inflows

August's edition of The Eurekahedge Report is now available with analysis of the industry’s performance so far in 2011, comparisons to previous years and an examination into where it might be headed.

The report also contains a look at the most up-to-date data numbers for July in our regular performance and asset flows section.

Highlights include:

The hedge fund industry saw $25bn inflows and $20.7bn outflows during July;

Baerum Kommune Appoints Northern

Northern Trust has been awarded an NOK606m (approximately US$110m) mandate to provide global custody, securities lending, transition management, and foreign exchange services to the municipal investment fund of Bærum Kommune, a suburb of Oslo, Norway.

“Northern Trust combines the scale and expertise of a global organisation with the focus and experience of a local provider, and this was very attractive to us” said Astrid Auran Nesbø, director of finance at Bærum Kommune.

China Inflation To Peak; Trade Surplus To Slow

John Greenwood, Chief International Economist, Invesco Asset Management, comments on the global slowdown and the outlook for China.

“As a result of the global slowdown, I would expect China’s trade surplus to slow a little bit, but not drastically.  The really important point about China’s trade is that China’s exports are growing substantially faster than the growth of the exports of any other country in Asia and the trade surplus is widening a lot more. So China is clearly gaining ground and that could be simply due to reallocation of labour and its own competitiveness, but it could also be an aspect of the undervaluation of the currency.

“I believe that China’s trade surplus is likely to continue to be very strong, and China will make ground against other Asian currencies as long as they’ve been appreciating their currencies more rapidly than China; China has been keeping its currency down. Of course it’s appreciated, but only relative to the US dollar.