Thursday, July 31, 2008

Back In The USSR?

Many moons ago I was in the military, the Royal Air Force, to be exact. It was a funny time to be a serviceman in 1985; we had just finished the Falklands conflict and seemed as if we were just waiting around for the next dust up.

By far the biggest concern for us, which was drummed into troops everyday, was the threat of attack from Russia. We were told 'loose lips costs lives'. We were shown bad training videos of how woman would be used by the 'communists' in bars to trap us. We were even supposed to report any sightings, wherever we were, of diplomatic cars.

Then, suddenly, the RAF Regiment were straightening trees, everyone was painting everything for days and Gorbachev rocked up at our air base for talks with Maggie. A decade later Yeltsin was getting drunk, dancing like your dad and the Berlin wall was torn down. We were all astonished to find, when the iron curtain was pulled back, not a technological wizard but a nation on the brink of bankruptcy and a country over-run by the Russian Mafia.

Years passed and the Bear clambered out of its poverty to become a power house once again. Sure we still had, affectively, a dictator in the form of Putin but the country needed someone tough enough to sort it out, in my opinion.

Investment flowed in, changes started to happen and the image of Russians became not some dour, grey, sullen people but a newly invigorated generation of rich, confident 'new Europeans'.

I met several Russians and found them to be amusing, interesting and charged with the spirit of entrepreneurship that somehow had faded in the UK and, I have to admit, my views of the country and its people changed dramatically. No longer the cold war threat but a land of opportunity.

I still have a soft spot for the Russians but I worry, these days, whether we are entering a new 'cold war', this time based on economics rather than ideology.

Foreign investors have become extremely wary of the Russian stock market after the Kremlin moved yet again to tighten its noose around the country's energy and mining sector, launching anti-trust probes against London-listed Evraz Holding and Raspadsky Coal.

The bare-knuckle fight for control over BP's Russian TNK-BP has also deeply shocked investors in the City and New York. The joint venture had been launched in 2003 with the personal blessing of Mr Putin, making it quite different from the foreign resource grab during the Yeltsin era that so enrages Russian nationalists.

"The market is panicking and foreign investors are pulling out of equities," said Michael Ganske, a Russia expert at Commerzbank.

"People fear that the rule of law is breaking down. I think this is an overreaction, but the Russian government has to be careful in the way it uses rhetoric in this investment climate," he said.

Mr Putin has already pre-empted the findings of the Mechel investigation, accusing the company of engaging in illegal price-gouging and abuse of the tax system by selling to their off-shore companies at a "quarter" of the world price. "This is a reduction of domestic taxable income. This is tax evasion," he claimed

Mechel's share price has fallen by half since the Federal Anti-monopoly Service (FAS) knocked on the door last week, shedding $8bn of market value. The company insists that it merely took advantage of uneven pricing at home and abroad in the coal-coking market and has done nothing illegal.

The FAS is now investigating whether Evraz - part-owned by Chelsea proprietor Roman Abramovich - and Raspadsky Coal have abused their "dominant position" in the coking sector. The two companies declined to comment. Along with Mechel, they control half the Russian market.

Investors are watching with a jaundiced eye, alert to the "Yukos risk". The Yukos oil group was hobbled by tax probes and effectively expropriated by the Russian government in 2004. Its former chief, Mikhail Khodorkovsky, is serving an eight-year sentence in a Siberian prison. The trial was widely criticised as a mockery of justice.

Robert Amsterdam, Mr Khodorkovsky's lawyer, said there is probably an ulterior motive behind the latest wave of probes. "We have reached a point in Russia where nothing can be treated as a one-off affair. There is a systemic raiding-mechanism directed by the top," he said.

"These types of attacks are usually combined with 'short-trading' by people inside the government, or they are a hard-ball tactic for extracting contracts. More broadly, I think foreign investors need to ask themselves whether they can trust the audited books of any company in Russia. It is impossible to conduct an independent audit," he said

Maybe Mr Putin is seeing this as an unfinished part of his project to make Russia the powerful nation it once was, but the problem with alienating investors is that this brings back the old mistrust of the Russian state and that is a downward spiral to building the wall again.

It is surely a good bet that Russia will never return to the old communist days, but the lessons that might be being learned from China is that you can still operate a totalitarian regime and create a vibrant capitalist style economy.

I just hope that this is not the beginning of the end for the fun loving, globe trotting Ruskis that at I have come to regard as a welcome addition to my friends and colleagues.

Wednesday, July 30, 2008

Insiders Arrested In London

Is it just me or are we seeing an American style stance from the regulators in the UK. I say this as news of 8 people being arrested in London is doing the rounds of the press. The tone is similar to that we have seen in the US with the recent Bear Stearns issue.

The fact is, you would have to be pretty dim these days to be involved in some type of insider trading situation as we all know that the regulators and politicians are sharpening their knives for anyone in the industry.

Their constant cock-ups of regulating the markets, highlighted by Northern Rock, is now leading to a regulator who needs a few scalps to re-assert its authority.

A sub-contractor at JPMorgan Cazenove, the investment bank and a junior member of support staff at UBS, the Swiss bank, were two of the eight arrested, it was confirmed last night.

The broadsheets report that the regulator’s largest criminal operation to date involved 40 of its staff and officers from the City of London Police. The task force arrested eight men, aged between 27 and 48, and executed search warrants at sites across London and the South East in what the FSA called an ongoing inquiry. “This is a major investigation for the FSA,” a spokeswoman for the regulator said.

The men were being questioned by police last night and lawyers have suggested that the nature of the simultaneous raids, and arrests, is a sign of an 'organised' group.

A Cazenove spokeswoman told The Times: “We can confirm that a sub- contractor in a support services function was one of the eight arrested.” The individual concerned was not employed by Cazenove but by a company contracted to Cazenove, the Queen’s stockbroker.

UBS confirmed: “We can confirm that a junior member of UBS’s support staff in London has been arrested and has been suspended from work while the FSA carries out its investigation.”

The raids come after a recent flurry of activity from the FSA, which has previously received strong criticism for being reluctant to use its powers of criminal prosecution.

The regulator currently has three criminal prosecutions under way, including a case against Malcolm Calvert, a former Cazenove partner accused of trading on inside information after he retired from the stockbroker. Mr Calvert, 63, from Cobham, Surrey, has indicated that he will plead not guilty to 12 counts of insider dealing.

On Monday the regulator charged Matthew Uberoi and Neel Uberoi with 17 counts of insider dealing in an indictment filed at the City of Westminster Magistrates’ Court.

The FSA has accused the pair, who are related, of exploiting inside information to trade thousands of shares in NeuTec Pharma and Gulf Keystone Petroleum over four months in 2006.

The thing with all of this is that insider trading is a notoriously difficult crime to prosecute because of the nature of the flow of information, especially in these times of the Internet. It also appears that FSA and other police and fraud authorities have found it difficult to prosecute even the most obvious of cases in the past.

However, the FSA does have a backdoor to prosecuting those who abuse the rules and that is 'Market Manipulation'. I believe this is a civil issue rather than a criminal one but it is far easier to prosecute.

I hope that if the group of insiders are guilty then the FSA throw the book at them, it will go a long way to cleaning up the business and will scare the pants off others doing it or contemplating doing it. I also hope that this is not just another FSA fishing trip built on rumor, innuendo and a few phones calls.

If they fail to prosecute this case, with all the press it has garnered, then it will be a huge error and more egg thrown in the regulators face just at a time when it does not need it.

I must admit, however, that I am feeling that the regulators and the politicians are really focusing on the industry as scapegoats for the current market crisis. What better than to have a bunch of wealthy guys as poster boys for a 'greedy' industry intent on enriching itself at the cost of the average guy?

Of course this is largely stuff and nonsense, but as a way to bring the flagging Labour government’s approval numbers back up it is a slam dunk with the public.

Batten down the hatches guys... there is more to come.

Tuesday, July 29, 2008

Link Love From Asset Manager

In all honesty, we do not set the world on fire as far as hits go but our articles get nicely ranked in the search engines and we receive many requests for advertising on the site. We have a PR rank of 3 - 4 depending on which checker you use...

If you would like to have a link from Asset Manager to your site please follow the instructions below. We will only accept link requests from financial and investment sites that have good content. Your site will appear in our 'Link List' on the right hand side with the title of your latest post.

1. Place a link with the words 'Online Trading' on your site, linking to

2. Email with the url of you site and the position of our link.
Simple as that..... Thanks

Monday, July 28, 2008

Commodities - Don't Shoot The Messenger

Every time I write something about commodities I get a thumbs up or a beating from regular investors. I don't publish the comments as some are just from commodity web sites hoping for a little action but I find them very interesting as an indicator. It is similar to the story of Joseph Kennedy and the shoeshine boy.

Joseph P. Kennedy was heavily invested in the booming stock market of the 1920s, until, legend has it, he went to Wall Street to visit his broker, JP Morgan, about a week before the great crash of 1929. On his way, he supposedly stopped to have his shoes shined. While doing so, he asked the shoeshine boy for the news on the street.

The boy, named Billy, suggested that he buy US Steels and RCA stocks because he had “heard they are hot.” Shoes sparkling, Kennedy then continued on to JP Morgan’s offices, where he liquidated all his holdings. Returning home, his wife asked him what he bought. “I sold everything,” he said. “When the shoeshine boy starts giving you tips, it is time to get out of the market.” The Kennedy dynasty was preserved from financial ruin, and Joe’s son, John, would go on to become U.S. president.

True or not, it is is a great story of contrarian investment philosophy that has helped people become rich and stay rich in the markets and maybe its time, with commodities where they are, to take note of the many small investment websites that are pounding on about commodities and look at this particular bubble as over inflated.

Now, before I get a flood of emails saying gold is good, oil is going to $200 and we are all going to starve from the high prices in food, I will say one thing.... I am not sure we have topped out just yet... but hear my arguments.

Having run a commodities business I am acutely aware of the arguments for the rise in commodity prices and have written many research papers that, with hindsight, could not have been more right, however, even when I was writing those research reports I didn't believe that higher commodity prices in general could live alongside high oil prices.

Which is why I think that there has to be a breaking point somewhere. I think we have struggled along with oil prices as they are, just as we put up with the mother in-law if she came to stay for a few months, sooner or later you would have to kick her out or move house... i.e do something about it.

Oil is taking money out of peoples pockets, therfore it is impacting dramatically on what they buy. Simple supply and demand will take care of the rest. Less money around, less to spend on food.... commodities reduce in price....

You can talk to me all you want about global populaion growth but there are not significantly more people in the world in the last 5 years to make food prices skyrocket.

Speculation is the one of the major things that has been blamed for the rise in prices.... I have to agree.

I know some of you will say that is poppy cock. Your argument is that the majority of speculation is in the futures market.. as this market is primarily a place where contracts are never delivered, how is it affecting the underlying price of commodities? Great argument.. don't know the answer.

But answer me this; $260bn, at best estimates, have been invested in commodity index funds, can you tell me that this has had no affect at all on the underlying price of commodities? I would love to hear some theories as to why not.

I am aware that no significant hoarding of commodities is being reported which would indicate that such commodities are not underlying speculation, but I just cannot see how speculation is not correlated, in some way, to the market price.

My conclusion is that supply and demand will take care of commodity prices in the short term. Increased food supplies as farms ramp up production and short term cut backs from consumers will give equilibrium to the market. As for oil, I believe that pressure will put on oil producers to bring the price down via increased production in the market, alternative fuels and lower consumer vehicles will also help the situation.

Whether this is all going to have an affect on the immediate prices in the market only time will tell, but something has to give for sure.

I am reminded of the guy I was in businesses with in the commodities market. He had been in the business for 40 years and used to say "The commodities market is a funny beast... but there is one thing you should know.. prices fall twice as quickly as they go up.

Sage words.

Thursday, July 24, 2008

Gaddaffi Looses The Plot.... Again..

Oh dear! We are not doing too well at the moment with our reputation as pacifists, staunchly avoiding the worlds conflicts and doing our best to be mediators.

No, the worm has turned and Switzerland is kicking ass! Our first prod was to upset the world's most powerful nation by letting our biggest bank help US citizens tax plan, now we arrest the Libyan dictators son for alledgedly beating people up.

Not a good few months at the office for us.

The latest situation is that the Swiss authorities arrested Libyan dictator Gaddaffi's son, although he is now out on bail.

Col Gaddafi's government has recalled some of its diplomats from Switzerland, reduced flights between the countries, stopped processing visa requests from Swiss citizens, demanded the closure of Swiss firms in Libya, detained two Swiss citizens and probably stopped eating cheese and stamped his feet a lot.
The most worrying thing, however, is that he has stopped shipping oil to Switzerland, as we get 50% of our fuel supply from there this could be a problem.

Swiss foreign minister Micheline Calmy-Rey has formally complained about the moves to her Libyan counterpart and has advised citizens not to travel to Libya. Swiss International Air Lines said Libya has reduced its flights between Zurich and Tripoli from three per week to one.

The airline's spokesman said: "The notice from Libya was very surprising and short notice."

Libya also announced a similar cut in Geneva flights with Libyan airline Afriqiyah.

Col Gaddafi's youngest son Hannibal, 32, and his wife Aline were arrested last Wednesday after an incident in a five-star hotel in Geneva. He was released on bail two days later after posting bail of 500,000 Swiss Francs. His wife, who is nine months pregnant, was taken to hospital during police questioning.

The couple were charged with assaulting two of their staff, a Moroccan man and a Tunisian woman, with a belt and coat hanger. The woman was hospitalised.

Mr Gaddafi, whose real name is Motassim Bilal Gaddafi, and his wife deny the allegations. They had arrived in Geneva on July 5 for the birth of their child. Switzerland have dispatched a diplomatic delegation to Tripoli to provide the Libyan authorities with more details about the arrest and "to prevent a crisis between the two countries", the Swiss foreign ministry said.

Libya is the largest provider of oil to Switzerland. Hannibal Gaddafi has had previous run-ins with the law. In 2005, he was convicted by a French court for striking his pregnant companion in a Paris hotel. He was given a four-month suspended prison sentence and a 500 Euro fine.

He also was at the centre of a separate commotion in 2004, when Paris police stopped him for speeding on the Champs Elysees and his bodyguards attacked several officers. Two of the bodyguards were taken into custody but released after a delegation from the Libyan embassy showed up at the police station and apologised.

I am sure the Swiss will deal with this, but isn't this an indication of the switch in power caused by the oil price. Affectivley Gadaffi is using his oil power to pressure the Swiss government into dropping charges against his son. I don't know about you but to me that is outrageous.

I don't care if you are the richest man on the planet, or the most famous of celebrity... you are not above the law. Beat people up... go to jail... it is not that difficult to understand surely? Even for the rich, spoilt son of dictator and a sponsor of terrorism.

It was only a little while ago that Gadaffi was shaking hands in tents with Tony Blair and his hangers on telling the world he was changed man.

Time is a great healer, I guess. He is back on form... US take note...

Maybe we should retaliate and freeze the billions and billions of dollars that Gadaffi, no doubt, has salted away in his Swiss bank accounts, or better still post the information on the Internet.... That would get his attention......and that of his long suffering people.

Record Industry Business Model Flawed?

The net has, obvioulsy, changed the business models of many businesses forever, however some old dinosaurs hang on to the belief that they can combat the Internet with legal threats.

I am talking specifically about the music industry, of course. This is on news that Britain's six largest ISP's have agreed to send tens of thousands of letters to users who have been identified as persistant file sharers.

The British Phonographic Industry (BPI) is expected to claim the deal is a victory in its war on filesharing, which has dented CD sales and severely damaged the music industry.

The six internet companies are BT, BSkyB, Virgin Media, Orange, Tiscali and Carphone Warehouse, which sells broadband access under the AOL and Talk Talk brands.

It is an interesting subject for me particularly as I am in two minds whether the Net is evil or good. I hate the fact that anonymity protects people from the long arm of the law when they are abusing people online, or worse, targetting the innocent for more henous crimes. I love the fact that the Internet has opened up the possibilities for commerce and social interaction on an unprecedented scale.

Something like the file sharing issue is odd to me, because I just think the music industry's business model has gone. I cannot remember the last time I bought a CD, it must have been 5 years ago. Everything now is dowloaded from iTunes and put on a CD to go into my car.

The thing is young people (those under the age of 24 - seen as the biggest number of file shareres) do exactly what we did when we were kids. When I was young I taped the songs I liked from the top forty, we swapped albums to tape on those double tape decks and as for video file sharing, when the VCR came in they were shared everywhere.

The only difference these days is that the dowloading of files can be tracked and, therfore, prosectued, well... the parents will be prosecuted:

"The parents of teenagers are the music industry's best target by a long shot," said Mark Mulligan of Jupiter Research. "Either they won't know what has been happening and be shocked, or will have been turning a blind eye and suddenly decide they have to do something."

Sure.. musicians rights to their music should be protected, but it seems to me that musicians and the record companies need to realise there just isn't the money in it that there was anymore. Protectionist policies like the record industry is relying on can only last so long and I will tell you why.

If I buy a CD and I loan it to my freind, have I broken the law? I don't think so. If he loans it to his freind, has he broken the law? No. If he copies it he has, but how would the record industry know?

Technoligical developements in this space are rampant, someone somewhere will develope a system that does not technically break the copyright laws and they will win a court case... after that.. it is all over.

The music industry should wake up and smell the coffee, their industry has changed and they need to start developing business models that reflect that change.

I am sure you can still buy the Encyclopedia Britannica, but when Wikipedia came along their days were numbered, if the music industry keeps the blinkers on they will go the same way.

Tuesday, July 22, 2008

Lock and Load.. It's Tax War

The latest in the tax Mafia saga hit the broadsheets today with news that hundreds of Britons with investments in offshore tax havens face electrocution...sorry.. 'prosecution' after an investigation by HM Revenue & Customs.

The tax office is believed to be particularly interested' in about 300 Britons with investments totaling more than £1bn offshore, most notably the tax haven Liechtenstein.

How did they come by this information? The tax authorities secured the information from a disc they bought. This disc reportedly contains information on 100 of the some of the wealthiest families in Britain who have accounts in Lichtenstein.

This is after 44,000 Brits gave up their banking information on the Revenue's last attack. It was worth it for them however, they claimed to have raised £400mn in back taxes, penalties and interest.

Those who didn’t 'fess up' are being investigated with the likelihood that criminal proceedings will be taken against the worst offenders.

As I have said before, I am not against the IRS, the Revenue or any other tax authorities seeking to maximise their tax revenue. I am very much against the methods that are being employed and the rhetoric that is going along with it.

Here is the story so far:

In February 2008, a global tax scandal erupted after a former employee of a Liechtenstein trust company provided tax authorities around the world with data on about 1,400 persons with accounts at LGT Bank in Liechtenstein.

On February 14, 2008, German tax authorities, having obtained the names of 600-700 German taxpayers with Liechtenstein accounts, executed multiple search warrants and arrested a prominent businessman for allegedly using Liechtenstein bank accounts to evade €1 million ($1.45 million) in tax. About a week later, the U.S. Internal Revenue Service (IRS) announced it had “initiat[ed] enforcement action involving more than 100 U.S. taxpayers to ensure proper income reporting and tax payment in connection accounts in Liechtenstein.”

The United Kingdom, Italy, France, Spain, and Australia made similar announcements on the same day. Altogether since February, nearly a dozen countries have announced plans to investigate taxpayers with Liechtenstein accounts.

In May 2008, a second international tax scandal broke when the United States arrested a private banker formerly employed by UBS AG, one of the largest banks in the world, on charges of having conspired with a U.S. citizen and a business associate to defraud the IRS of $7.2 million in taxes owed on $200 million of assets hidden in offshore accounts in Switzerland and Liechtenstein.

The United States had earlier detained, as a material witness in that prosecution, a senior UBS private banking official from Switzerland traveling on business in Florida, allegedly seizing his computer and other evidence. In June 2008, the former UBS private banker, Bradley Birkenfeld, pleaded guilty to conspiracy to defraud the IRS. His alleged co-conspirator, Mario Staggl, part owner of a trust company, remains at large in Liechtenstein. The current UBS senior private banking official, Martin Liechti, remains under travel restrictions.

The above is taken from the Senate Hearing Committee chaired by US Sen, Carl Levin who has said;

"Tax havens are engaged in economic warfare against the United States and honest, hardworking American taxpayers."

He chairs the same Senate sub committee that was headed by Senator Joseph R McCarthy. Yes the very same McCarthy who gave rise to the term "McCarthyism" when directed at "the practice of making unfair allegations or using unfair investigative techniques, in many instances unsupported by proof"..

I don't know your view but bribing a disgruntled employee and giving him a new identity for giving up the information seems...well, a little 'off'.

You have to read the Senate Hearing Report in order to get a full grasp of the information that this guy gave up. It was not just bank account details with money in, it was huge amounts of information on corporate structures.

For example (and I have changed the names..if you want to read the will be on the net somewhere).

MR X Accounts: Hiding Assets from Courts and a Spouse.

Mr. X, a U.K. citizen, has claimed residency in Bermuda, but lived in California for a decade, from 1991 to 2002. In 2003, after his wife of nearly 40 years filed for divorce, he effectively disappeared from view, ignored court orders to transfer California real estate and £3 million in alimony to his ex-wife, and hid assets from the court in offshore jurisdictions around the world, including possibly at LGT.

LGT documents show that, in the early 1990s, LGT helped Mr. X open an account in Liechtenstein and deposit millions of Swiss francs, apparently transferred from another Liechtenstein bank that had been disclosed to his wife’s legal counsel.

In 1998, having obtained information indicating that Mr. X was hiding assets from his wife and tax authorities, LGT nevertheless helped him form a Liechtenstein foundation and transfer into its account his existing LGT funds, then valued at nearly 10 million Swiss francs or $6.6 million.
Also in 1998, Mr. X purchased a $700,000 condominium in California, hiding his ownership by making the purchase in the name of a Guernsey corporation owned by a Guernsey trust. Despite evidence that he lived in the condominium for years, Mr. X denied being a U.S. resident; an internal LGT memorandum noted approvingly: “The financial beneficiary has his PLACE OF RESIDENCE IN BERMUDA and not in the U.S. Hence, he pays no taxes in the U.S.!!!!!!”

At the end of 2001, $6 million in assets remained at LGT. In 2003, a U.K. court ordered Mr. X to pay £3 million in alimony and transfer the California realty to his ex-wife. He failed to acknowledge or comply with the court order. When Ms. X filed papers to enforce the U.K. court order in a California court; Mr. X unsuccessfully contested the case. In the end, the U.S. court awarded Ms X the real estate, but she was unable to obtain the alimony. The existence of the Liechtenstein foundation and funds were not disclosed to the courts or his ex-wife.

That is not just bank information, that is laying bear the complete structure of Mr. X's protection of his money. I am not making a comment that he was right or that it was legal, I merely use the above to show the kind of information that was received from the LTG banker.

For anyone with complicated tax structures out there, this must be a frightening revelation.

The issue for me, in all of this, is not that the IRS or any other authority are not entitled to unravel such structures if they are illegal, it is the way that they have come across this information.

The UK reportedly paid £100,000 to see the information on the disc handed over by the banker and have started investigations off the back of it.

Lichtenstein, like Switzerland and other countries have laws that fuel an industry based on efficient tax planning. They have chosen not to make tax evasion illegal and that is the law of the country, why is that not being respected by the international community?

Tax competition is there for all to see. If I can structure my tax affairs with trusts and companies legally formulated through tax havens, what is the problem? If you want to keep more money on your shores, don't tax people as much. If you can't afford to run your country with lower taxes then make cut backs. $255mn per day (not to mention 3000 brave souls) is the cost of the Iraq war for example...

Isn't this the root of our current problems in the market? Countries, companies and individuals borrowing more than they can afford to pay back. Taxes go up (or in this case the tax authorities declare 'war'), companies put up prices and consumers default on their mortgages.

To extend the notion that the root of all evil is people that want to avoid (not evade) paying taxes that fuel an over-indulgent country collapsing under the weight of its own fiscal mismanagement, is, frankly, absurd.

When those countries then unleash bribery and other illegal activities to by-pass sovereign nations laws we are heading down a road that will only end in tears. The problem is, however, that the cartel of tax authorities are obviously hell bent on breaking those countries that are better a tax management than they are.

It's war alright, but it is not on those countries bleating about tax evasion, it is on the inalienable right of an individual to protect his wealth from the tax authorities.

This quote from Frederic Bastiat sums up the current tax war perfectly:

"The war against illegal plunder has been fought since the beginning of the world. But how is legal plunder to be identified? Quite simply, see if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Then abolish this law without delay ... If such a law is not abolished immediately it will spread, multiply and develop into a system."

Monday, July 21, 2008

Online Trading -

Online Trading - Making Sense For You?

Kipling said "If you can keep your head when all about you are losing theirs and blaming it on you; If you can trust yourself when all men doubt you, but make allowance for their doubting too; . .If you can meet with Triumph and Disaster And treat those two impostors just the same . . Yours is the Earth and everything that's in it."

I saw this quote in one of those free online trading courses that you often see in your inbox. Well you do if, like me, you subscribe to any newsletter you see on the web. I do this becuase I love to read others opinions on what is going on and there have been some cracking calls and some really very lousy advice.

The above quote was accompanied by an 'online trading manual' that was primarily involved in forex. I don't particularly get involved in FX but it is a trade like all others. However, the writer must have cobbled together many different manuals to create his 'free online trading course' because it made very little sense all the way through. It is also easy to tell that some of the manual was written by the author and other parts not because the 'voice' was different, if you know what I mean. One minute it was all efficient and straight to the point, the next minute it was jibberish.

A great line from it which had me rolling about the floor was 'the price may go down when there are more buyers than sellers'.

When I was a broker, this was a standard line bandied aound the dealing floor as a joke and a put down to newbies. "Excuse me Boss, why has XYZ Plc gone down today" - "More buyers than sellers, mate" came the reply followed by wicked laughter as the newbie passed this on to his client.

The funny thing (or maybe not funny) is the web has opened up the market for clients to trade online, but at the same time has spawned an industry of 'professionals' teaching investors 'how' to trade. Put "online trading courses" into Google and there are 27,200 pages. I wonder what percentage of those are suspect?

Trading online is a a fabulous past time, a job even, when you have the skills to play the markets successfully. In my opinion there is no better training than actually doing it and learning from those who are doing the same.

One great site that I found is an trade trigger system for a certain instrument, I am not going to tell you and I will tell you why.... It is great and I want to keep it to myself as long as I can....

Basically it is a system that tells you which way to trade based on actual broker involvement crossed with an algorithmic system. It may sound like an oxymoron but thats is how it works. These volatile times were a big test for it, but it has come through with flying colours...and nice profits.

The point is that if you are an online trader or you are thinking about online trading, there are some real dross 'online trading manuals' out there which should be avoided at all costs, but do not fear as there are some fantastic resources to help you also.

HF Markets advertises on this site. We like them basically because they have done a lot of the hard work for experienced and new traders.

One of the things I find a pain is to reserach individual shares. I much prefer to play indices. Looking for individual trading opportunities is a real time consumer.

Each day, however, I receive several emails on trading ideas, with target profit, target stop loss and the research behind these. It gives me an opportunity to concentrate on those individual trades and decide on yes or no.

It is not just stocks (which generally are CFD recos) but FX, ETFs etc. They give updates as well, if trades have changed, which I find useful. Inputting a stop and limit on a trade and the forgetting about it is a danger if you are trading many instruments.

The chat facility in the online trading system at HF Markets is also excellent. A quick chat in the morning to see what is what, reminders of emails sent because trades have changed and general dicussions on the traders opinions are very useful.

The advice I would give to anyone looking to up their game in online trading, or those who are just starting in the online trading space is to download a demo system and see if it is one you can get on with. Find out if it has all the necessary knobs, bells and whistles that you require and then jump in.

It is amazing how quickly you learn when your own money is on the line....

Saturday, July 19, 2008

Hedge Fund Manger Toy Of The Week

Struggling to get up a 6.30 to catch the markets?

You'll have to get up when this little baby starts, because it takes off and flies round the room, making a really annoying noise like a mosquito,so you'll have to find it first, before you can turn it off. Even if you hit the snooze button, it will take off again, so it will undoubtedly get you out of bed, though of course it might smash the place up a bit before you catch it, and if you sleep with the windows open you might find yourself running round the garden in your jimjams (no way to wake up) and may frighten the neighbourhood dogs.

There's also a slight danger that if you are a really heavy sleeper, and the things flies around the room without waking you up, eventually it will run out of juice, so it could wake you up by dropping on an exposed body part, such as the head, though I suppose you'd at least be awake. Or unconscious, possibly!

However it's a terrific fun item, and has already won a technology design award for its innovation and flair and makes a neat gift for anyone who has trouble getting out of the old pit in the mornings.

Friday, July 18, 2008

UBS Offshore Accounts Closed To US Clients

Having talked yesterday about Swiss banks needing to extricate themselves from 'unfriendly jurisdictions' and consolidate back here in the shadow of the Alps, UBS has announced that is to stop providing offshore banking services to American Citizens.

The offshore banking business has already been closed but they have gone a step further and have said that it will now not allow bankers from Switzerland or elsewhere in the world travel to the US to meet clients on banking matters or securities transactions

That decision follows an earlier ruling by a Florida judge to give the IRS permission to serve legal papers on the bank to attempt to force it to hand over the names of up to 20,000 US clients.

Mark Branson, UBS Global Wealth Management's chief financial officer, yesterday revealed the change of tack during a US Senate hearing on the issue of tax avoidance. He said that while UBS is winding down its offshore business for US citizens, there will be "no new accounts opened".

It looks like the writing is on the wall for Swiss banks in the US. If UBS cannot deal with the legal issues then who can?

It does bring up the interesting issue of others providing offshore services to the US. I did a Google on "Offshore Tax Shelters For US Clients" and the list came to 104,000 pages. Wouldn't want to own one of those businesses....

Another thing to consider is that the news coming from the US is that some of the rules on 'assisting US citizens to avoid tax' are looking to be retrospective. This holds up the frightening prospect of advisors in the US being hauled up to court for advising clients on tax avoidance, legally, but now, with the rule changes it will have been illegal.

Tell me how that will work?

I have made no secret on this blog of the fact that I am not particularly enamored by some of the under hand tactics being used by tax authorities all over the world, from the Germans bribing bankers to the US arresting them. I think it is becoming a sinister plot to castrate the tax efficient structures that people put in place to protect their assets.

Of course, I am aware of the need for citizens of a country to pay tax proportionate to their earnings, but is it any surprise when stealth taxes take their toll?

I posted on the blog some time ago a calculation on how much tax is paid on £100 spent on goods and services. This was when oil was at $60 per barrel. If you are a higher rate tax payer in the UK and you spend the £100 on a range of mundane weekly items you will be paying (with oil at $60 remember) £77 in direct and indirect taxes. That means for every £100 you spend you were only getting £23 in goods and services....

Can you blame people for seeking to protect some of their wealth from the tax man?

This issue of retrospection also throws up all sorts of problems for those seeking to structure their taxes efficiently. What you do today could be illegal tomorrow... surely that is against some fundamental principals of law?

I was going to go on to say that we can all do something about it at election time, but the thing is, with politicians spouting populist rhetoric it would be easy to put up a picture of a billionaire private equity fund guy and hoodwink the general public into voting for the most heinous of restrictions on protecting your wealth.

Come back Maggie and Ron, you knew the value of wealth creators and saved the world... this current crew are leading us down the path to oblivion.

Thursday, July 17, 2008

IRS To Close Offshore Account Loophole

The fun-busters at the IRS are up to it again and the Swiss banks are the targets.

The IRS is to close a loophole relating to its agreements with foreign banks that allegedly led to UBS's troubles.

Barry Shott, the IRS's deputy commissioner of international affairs, said in an interview the crackdown will make it harder for Americans to conceal assets in offshore shell companies. The agency for the first time will require accounting firms to report any activity that may constitute fraud as defined by the U.S., he said.

``We're trying to pierce the veil,'' Shott said. ``It's going to happen in the near future. This is not a long-term project.''

The legislation has been brewing for 2 years and is aimed at tightening the 'Qualified Intermediary' contracts. This program was original developed so that the IRS could keep a beady eye on US citizen’s money in foreign banks.

Under this contract the banks would confirm the identities of the account holder and notify the IRS of income earned within the accounts. The pay-off was that the banks could eliminate withholding taxes or withhold taxes at favourable rates. Without this agreement they would have to withhold 30%.

Banks participating in the program also must agree to be examined by external auditors approved by the IRS. Foreign banks generally agree to take part in order to maintain access to U.S. markets.

The new rules would require banks to identify the actual owner of an account's assets and the recipient of any interest payments. If the individual is an American, the bank must file a 1099 tax form with the IRS and withhold taxes at a 28 percent rate or face possible criminal charges, Shott said.

Shott said the IRS is still in discussions with the Treasury Department over whether to make the rules retroactive.

In court papers filed last month, the IRS quoted former UBS official Bradley Birkenfeld as saying the bank separated clients into those willing to comply with disclosure rules and those who wanted to remain hidden. Many of the clandestine depositors hid assets by using layers of shell companies.

Basically, the new rules would require banks to let officials know the ultimate beneficiaries of the shell company to determine whether it is an American that owns the account.

This opens up all sorts of questions about dealing with offshore banks in the US. For example, does this mean that if you are not a US citizen, using a shell company to protect your assets that an IRS approved auditor will then sift through to the beneficial holder to see if it is a US citizen. If so, and they find that the beneficial holder is not a US citizen, what will they do with this information?

To suggest, in the current climate, that the IRS would not share the information with the UK tax authorities, for example, is far fetched...I would say.

What we are seeing is an international tax conspiracy aimed at wiping out any sort of tax loophole. It is, in my opinion, futile. Yes, for the average Joe trying to save a few bucks on tax it is going to become very, very difficult. Swiss banks, for example will be turning away 'unofficial' American clients by the truck load. Would you, as a Swiss banker, now take on an American client? Me neither. But there will be others clever guys working on news ways of saving tax... it's a big industry. To stamp it out will be impossible.

Bradley Birkenfeld knows only too well the fate of those who are involved in this area, however.``I was employed by UBS and paid a large salary and incentivized to do this business,''
Birkenfeld, 43, said to U.S. District Judge William Zloch in Fort Lauderdale, Florida, at his plea hearing. Birkenfeld faces a maximum sentence of five years in prison at his sentencing, set for Aug. 13.

Birkenfeld implicated other unidentified UBS bankers and wealthy clients in his plea, helping U.S. prosecutors as they deepen their probe of whether the bank assisted Americans in evading taxes. In a document accompanying his plea, Birkenfeld described the bank's systemic efforts to help U.S. clients conceal $20 billion in assets abroad. UBS collected about $200 million in annual revenue through those efforts, he said.

In court, Mr. Birkenfeld wore a charcoal pinstripe suit that was as solemn as his face. He told Judge William J. Zloch that he knew he was breaking the law but did so because of the “incentives” UBS offered him, meaning large bonuses.

Judge Zloch asked if he had not been troubled by his actions.

“It did concern me, your honor,” Mr. Birkenfeld said. (... comment)

Is this the end for Swiss banking and the offshore tax industry in general? I don't think so. The Swiss have said that their banking secrecy rules are not up for negotiation which I hope is the stance they continue with.

It appears to me that the business model is changing and this change is going to kill off the world-wide nature of Swiss banks such as UBS. The model going forward would be best seen as 'localisation' of services.

What I mean by this is a pull back, by banking and wealth management operations, into Switzerland. Closing offshore operations in unfriendly jurisdictions or structuring such companies under separate ownership with defined rules that do not allow links between citizens of unfriendly jurisdictions to open swiss accounts.

This would be a great boon for the private banks and wealth managers who are solely based in Switzerland, protected by the laws of this country.

Personally, I find the current nature of the tax authorities to be very sinister. It appears that countries such as the United States can impose on the rest of the world their own rules when it suits them, but who avoid international feelings on other matters.

Take Kyoto, for example. The US refuses to sign up to this agreement. In rejecting the Kyoto Protocol, which 178 other nations had accepted, President Bush claimed that the treaty requirements would harm the U.S. economy, leading to economic losses of $400 billion and costing 4.9 million jobs. Bush also objected to the exemption for developing nations. The president’s decision brought heavy criticism from U.S. allies and environmental groups in the U.S. and around the world.

No worries about the Swiss banking industry going under though, is there Mr President?
Should Switzerland therefore ban US imports or perhaps detain US citizens working in 'polluting industries'.

Unlikely, n'est pas.

I know you will say this is comparing apples and oranges and that tax issue are legal matters blah blah... but see my point on this, where does it end?

When will a corporate advisor be arrested for advising a US company on its tax strategy or a CEO arrested for moving his company offshore to save taxes.

Sounds ridiculous right?

Tell that to Bradley Birkenfeld and UBS.

How To Become A Hedge Fund Manager

Becoming a hedge fund manager certainly has its perks... if you are successful. The King of the Hedgies is currently John Paulson who raked in £1bn for a years work shorting the sub prime markets and others certainly are not poor.

What do 'Hedgies' do and can you do it?

The answer to that question is a yes and no. Just like it is possible for everyone to be a sports star. If you have the right physical capacity, the mental toughness and the commitment you can get to the top of your game, and of course, there is an element of luck in everything.

The first thing to know about hedge funds is what they are. There are many resources on the web that will go into chapter and verse but the simple explanation is that, typically, a hedge fund is a set up as a company, lets call it XYZ Ltd, which is set up in a tax efficient jurisdiction such as the Caymans or BVI, for example.

The company generally has two classes of shares (it can have more) one are mangement shares (so you own the company) and the other shares are investors shares (which carry no voting rights).

This company will have various service providers such as:

Prime brokerage: Prime brokers provide a range of customised services to hedge funds. Current services include handling trade execution, clearing and settlement, providing financing and technology services, risk management and operational support facilities, securities lending, and making introductions to sources of capital.

Fund Administration: Some hedge hedge funds conduct administration internally while others choose to outsource certain functions such as their accounting, investor services, risk analysis or performance measurement functions to third party administrators. Some outsourcers offer independent pricing of a fund’s portfolio of securities.

Custody: Hedge fund assets are generally held with a custodian, including cash in the fund as well as the actual securities. Custodians may also control flow of capital to meet margin calls.

Of course there will also be a manager of the fund. Assuming you are the one looking to set the fund up, that would be you.

This all sounds a little complicated but there are plenty of administrative services that could put this set-up together for you for around $70,000.

The set up, however, is not the problem. Getting money into the fund is.

Lets say you have a fund set up, you have even managed to get yourself a fund management company properly licensed, you are ready to go as a newly fledged hedge fund manager.

Problem now is that you have to get money into the fund and this is where your problems start.

The continuing fees from your administrators above are payable on an annual basis so your overhead is there. Covering these overheads will be the fees you get from your fund. Fees are the now notorious '2 & 20' meaning that there is a 2% annual fee and 20% of the profits.

Lets say your overheads are £100,000 per annum, you will need at least £5mn into your fund for the annual fee to cover your overhead.

In anyone's language, that is a large chunk of change. To get this you will need to prove to potential investors that you know what you are doing.

Sarah Butcher, editor of agrees. "You can't just be someone off the street and set up a hedge fund," she says. "Investors want to put their money with someone who has a track record."

When speaking with investors you need to be able to show them your performance and the strategies you use. Gaining this experience is the key.

Going the traditional route you will either train with an investment bank or directly with a hedge fund company. Investment banks are looking for someone with a good degree, maybe in maths or physics, they want someone who is tough minded, a quick learner and someone who has the capacity to make trading decisions based around sometimes complex structures.

Finding your way directly into hedge funds can be hard, they are notoriously secretive. By far the more tradional route is through working as a trader with an investment bank.

So if you have missed the boat as far as becoming a new boy at an investment house are your dreams of becoming a hegde fund trader over?

Not quite. The thing about managing money is that people are looking for performance. If you can show a track record of performance then people will want to invest money with you. You clearly have to have the capacity for enjoying the stock market, so you probably have been buying and selling stocks but you will need to learn more about other market instrument such as futures etc.

You can do this by opening an account at a reputable trading house and downloading their trading system. HF Markets advertise on our site and are very good. They provide direct trader support from Moneycorp Markets which is essential if you want to learn about how its done.

They will provide you trade ideas and the explanations behind them and they will help you develop your portfolio operating on trades similar to what the hedge funds do. If you immerse yourself in this type of trading, making profits on your own portfolio, then you are creating a track record. If you are successful enough then you may get to the point where you believe you have the capacity to start a fund.

We are not saying it is easy, it most certainly is not, but not being a 20 year old with a first from Oxford does not necessarily limit your potential career as a fund manager. It is a long hard slog to get anyone to believe that you are credible but the rewards are there if you get to that stage.

The billionaire boys have spent years perfecting their art in most cases and now have the ear of huge amounts of money, but don't give up becuase you can't work in an investment bank.. remember 'money follows performance'.

If you are serious about becoming a trader, then the Forex markets are an easy place to start. I say 'easy'.. all trading is tough... but the forex market has so many resources online that it is a great place to start. If you are interested in FX trading then this Forex trading aid is a must...


Tuesday, July 15, 2008

SEC Move On Naked Shorts

The U.S. Securities and Exchange Commission will take emergency action today to limit the ability of traders to bet on a decline in the shares of Freddie Mac, Fannie Mae and brokerages, the agency's chairman said.

Christopher Cox told the Senate Banking Committee that the SEC will issue an order today imposing a ``preborrower requirement'' on short sales in the mortgage-financing companies and Wall Street firms. The requirement would prohibit the practice known as naked short selling, in which traders avoid the financial burden of borrowing shares when betting they'll fall.

Crickey..... That's pretty hardcore. I guess it was coming, and I have to say that the practice of being naked (actually not borrowing the shares to sell) is not a great high point in the rules of the markets. It is incredible to think though that provisioons are being forced on the markets for particular companies, and it looks like this will be address.

``In addition to this emergency order, we will undertake a rulemaking to address the same issues across the entire market,'' Cox said in his remarks to the committee.

The SEC is investigating areas of the market where shorting may have had a big affect. Bear Stearns and Lahmans come to mind which clearly were shorted in big style.

Freddie Mac, was down 34% until this statement which helped it get half the loss back.

``I don't think the government should ban short-selling in anything as long as it's fully disclosed, as long as there's no manipulation,'' MFS Investment Management Chairman Robert Pozen said in an interview with Bloomberg News yesterday. ``Don't we want the market to work here?''

In traditional short selling, traders borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.

The issue here, with naked shorting is not that it is illegal, its not, but has there been manipulation which is illegal.

You can be sure the SEC will be slapping someone soon and it appears that this is just the start of an assault on shorters....

Traders Back To School

In a sea of bad news about the economy, there is a bright spot for the people of metro Atlanta, USA. Online Trading Academy is open and ready to teach experienced traders and novice investors alike what it takes to be consistently successful in a volatile market.

According to Online Trading Academy Atlanta owner, Phil Shafer, it sounds simple, but the way to beat the market is to "not lose money." "We teach people how to analyze trends and recognize patterns, so there are no artificial 'buy orders' and 'stop losses,'" says Shafer. "When you understand how to read the signals of any market, not just the stock market, you can make better decisions. Professionals use these same techniques everyday."

Online Trading Academy offers a range of classes from a free, half-day workshop to a seven-day in-depth training program. Students learn in a state-of-the-art classroom, led by experienced traders, and get hands-on-practice with live trading in a risk-free environment using Online Trading Academy's money.

"The difference between Online Trading Academy and what might be considered our 'competitors' is that we are an actual school with live instructors," says Shafer. "We are not promising get rich quick methods to thousands of people in a hotel ballroom. Our curriculum teaches methodical, disciplined trading techniques - the key to consistent success, not instant wealth."

Interested students can make an appointment with an Education Counselor for an individual consultation about learning opportunities by calling . Or they can attend the half-day workshop for an overview of the curriculum.

"Our mission is to transform lives through financial education. With Online Trading Academy's advanced technology, exceptional teachers, and professional trading guidance, we can help people achieve their personal and financial goals," says Shafer.

We think this is a great idea. If anyone knows of something similar in Europe, let us know and we will do a piece on them.

Sunday, July 13, 2008

Hedge Fund Manager - Toy Of The Week.

From: FAO Schwarz
Cost: $300,000
Can $348,432

Just in case your not getting enough of a roller coaster ride from the markets right now, this aviation-quality 3-D Motion Simulator from FAO Schwarz seats eight for CD-ROM-driven excitement, including space trips, roller coasters, slot car races, cool--if not downright chilly--glacier adventures and more.

With a fully digital audio-visual system and ergonomic styling, it's a comfortable and super-thrilling ride for the junior set. The £173,000 price tag would get you a new Lambo and change... but you already have one of those... don't you?

Saturday, July 12, 2008

Jongleurs Entrepreneurs To Launch Comedy YouTube

Serial entrepreneurs Maria Kempinska and John Davy announced today that they are set to launch an online comedy site to bring the best of comedic talent to the internet with a dedicated IPTV offering combined with social networking features.

Kempinska devised and established the first Jongleurs club in 1983 and was joined by her business partner John Davy in 1985. They sold Jongleurs chain of eight clubs to Regent Inns in 2000 in a deal that valued the company at £30 million. Kempinska and Davy received £8.5 million and stayed on running the creative side of the clubs.

In the terms of the trade sale they retained the Jongleurs brand name, all digital and media rights, the database of acts and joint custody of the Jongleurs membership fraternity with an exclusive contact to book all the talent that appears on a Jongleurs stage.

Jongleurs.TV now aim to use the IP and digital / media rights to leverage the brand name and customer base to create the UK and Europe’s leading comedic content provider across a range of digital media platforms. The physical clubs will provide volumes of content and, along with the booking site, act as an engine to drive traffic through to the website.

The existing site ( is purely an information and ticket booking facility but has 325,000 online members and unique monthly traffic of 200,000 despite little advertising or any significant entertainment value.

Kempinska and Davy aim to leverage the existing membership, traffic flow and wealth of content to create the benchmark broadband comedy channel, firstly in the UK before rolling the brand out globally.

They are starting with a database of 1300 stand up comedians who regularly feature in Jongleurs’ clubs and events. They also maintain great relationships with all the top comedy talent in the UK, many of whom caught their initial break through Jongleurs. To be able to offer unique comedy content from this database will attract many more users to the site.

As well as creating an outlet for stand up comic’s videos the company are taking a step into the world of social networking. “Jongleurs became successful because of word of mouth. People had a great time in the clubs, told their friends and we were soon in a position to expand the business across the country. Jongleurs is still a great night out and we believe we can enhance that by giving fans of the comedy clubs a platform to interact and share their experiences and videos. Being able to start off with a good portion of the 325,000 online members would catapult us in amongst the top niche sites in the UK. Users will be able to create their own comedy spaces on the site reflecting their unique tastes which can then be shared amongst friends - 80% of all social e-communication is fun-related.”

Having a user-base already in place and having a known brand can only help the company reach its goal of being the premier online comedy channel in the UK by 2010.

However, Kempinska and Davy have more ambitious plans to expand the company overseas to develop a world-wide audience. “Comedy is an international commodity and the web gives us a fantastic platform to be able to expand our horizons world-wide. Having a known brand name and being known in the business allows us to open doors that, perhaps, others may find difficult. We intend, therefore, to leverage our UK operations into a world-wide business by 2011.”

The company is talking to financiers about funding development of the new venture and has engaged HF Capital Ltd, a boutique corporate finance firm in the City of London, to manage the transaction. Speaking about Jongleurs.TV, Tim Brown, CEO of HF Capital, said “We are delighted to have been engaged for this project. The online media space is a bright spot in the market at the moment and it is a rare opportunity to be able to leverage a 25 year old brand into an online media business. With an existing user-base and the brand loyalty that Jongleurs.TV possess we feel that the company should be a huge presence and success on web 2.0”.


Tim Brown
HF Capital Limited
31 Lombard Street
London EC3V 9BQ

+44 207 648 6020
Source - HF Capital

What Really Is The Piont Of The UN?

Being in Switzerland, 'sans SkyTV' and speaking ropey French is the perfect storm to create an addiction to news programs. Yes we get English movies and programs but the constant is CNBC, CNN and BBC News 24.

Don't get me wrong, I am a news junky, have been since I was a kid when my brother convinced me that when the news talked about 'Guerillas' they were, in fact, Gorillas trained to use weapons. That Brian Ferry was actually Prince Charles and the 'Kid Catcher' from Chitty Chitty Bang Bang lived in France.

Needless to say my view of the news was slightly skewed by my brothers 'spin'. I expected 'Comical Ali' to whip off his mask and have my brother beaming out of the TV. When I think about it he could have made a lucrative career out of spinning the news for dictators. He would be in high demand in Sudan and Zimbabwe where the deluded governments are spinning lies all day long. The words 'free', 'fair' and 'election' spring to mind in Zimbabwe and don't get me started on those nutters in Sudan.

This brings me, by way of cathartically dissing my brother, to the point of this article and that is the UN.

Watching the news from Zimbabwe and Darfur is a heart breaking experience everyday, and what have we seen from the UN?

Fifty two years ago this autumn, the UN provided the textbook example of effective action. Within five days of the Anglo-French attack on Suez at the end of October 1956, the UN had begun to construct a force which took the place of the invaders, cleared the canal which our action had blocked, and gradually levered the Israelis out of the Egyptian territory that they had occupied.

This prompt action was the work of two outstanding international statesmen - Dag Hammarskjold, the Secretary General of the United Nations, and Mike Pearson, the Foreign Secretary of Canada. It was made possible by the determination of the United States that the Anglo-French enterprise should fail, and by the acceptance of this fact by the British Cabinet. Those UN resolutions were built on solid ground' it was the Anglo-French enterprise which had not been thought through and lacked foundations.

This decisiveness seems to have all but disappeared from the UN these days, recent Russian and Chinese veto's of sanctions against Zimbabwe have bolstered the regime with one crazed Mugabe hanger-on saying that he 'thanked the Russians and the Chinese' for seeing 'reason' and supporting 'Zimbabwe against the bullying by the United States and United Kingdom'.

Nice one China and Russia.

Is it really the time to hold off and watch more people be killed and more woman in Darfur get raped? How will you be able to negotiate with these genocidal maniacs?

How would that go?

Ban Ki-moon -"OK Mr Mugabe, what do you want?"

Mugabe - "To be in power for ever, to live for ever, TO RULE THE WORLD......"

BKM - "Well that’s not going to happen is it?"

Mugabe - "We'll see"

BKM - "Now come on, Rob, my old buddy. If you slip out the back door, we'll put you up in a nice warm country, with a big house, a fat bank account and as many girls as you can handle.. you old rascal"

Mugabe - "ER... Have you looked around you?"

BKM - "OK, good point. Can you just stop killing people then?"

Mugabe - "That's not me, it's Morgan and his bad boy crowd... wrong 'uns they are"

BKM - "Liar, liar, pants on fire"

This is my point. All the billions of dollars that it, no doubt, costs to fund the UN, the endless meeting and the endless arguing, all comes down to the 'liar, liar, pants on fire' resolution... and then we start bombing.

I have read a lot of blogs that ridicule the UN, and so they should. The UN's inaction in Darfur and Zimbabwe is blood on their hands and the politicians who fly first class to these events and then spout political rhetoric, but create no hard and fast solutions to stop the mass killings, should be ashamed.

It is not as if this situation is new, Rwanda, Somalia, Liberia, Sierra Leon, The Congo.. all over Africa people have been slaughtered in their millions by power hungry politicians while other power hungry politicians in the UN just stood by and watched or should I say - sent a bunch of brave guys dressed in blue.. to drive around a war zone in white vehicles with guns they were not allowed to shoot..

What is the point of the UN if it cannot intervene?

I agree the solution is a complex one, but one that can be sorted. After the tragedy of 9/11 terror organizations around the world started to 'negotiate'.

The IRA disappeared, not because they suddenly came on the side of peace, but because they would not be funded by the US NORAID or shielded by the US. I guess they were also worried about the change in attitude by the US and the world’s powers on terrorism. The US could hardly have a 'war on terror' and call the IRA 'Freedom Fighters' any more, could they?

Other groups such as the Tamils and ETA, either went very quiet or negotiated, worried about the coming storm of retribution against terror. The worlds military, intelligence and power stood shoulder to shoulder to wipe out terrorism forever.

The dictators of the world held their collective breath, some like Colonel Gadaffi saw the writing on the wall and supposedly turned away from the dark side in a flurry of handshakes and tents.

Then it happened....exactly nothing. Yes Afghanistan was invaded and yes Iraq was invaded but that was th US. The blow to terrorism didn't come. Dictators stood by and watched as conflict after conflict could not be solved by the UN and no forceful action was taken.

Idiots like Mugabe became emboldened and it all kicked off again. The message the UN sent was much like a teacher to a bully... don't do it again or you will be suspended.

'Big wow'. As one who bullied me at school said when he was told the same by a teacher who caught him punching me.

That bully ended up flying down some stairs in front of the entire class with my foot firmly behind him. Bruised, battered and crying he skulked off. He never came near me or my friends ever again and I never had another occasion to deal out such retribution.

I learned that, in the playground, bullies only respond to violence, negotiations are not in their nature, negotiations will just get you another beating. Maybe those in the UN Ivory Tower should go back to school, if only to learn that simply 'talking' to bullies like Mugabe is a 'Big WOW'...

The artwork in the image above outside the UN is supposed to symbolise peace, but it is more a representation that the possibilities of the UN have been nutured by the power hungry politicians who care only for more power...

Friday, July 11, 2008

Buy-to-let Meltdown?

The real estate 'four horseman of the apocolypse' have so far avoided riding into the UK. One suspects they are a bit busy in the US. The UK may be in a position to avoid such a meltdown but it looks to me like its going to be a close run thing.

House prices are falling.. fast. The fall is at a faster rate than the late 80's early 90's and if you remember that time is was not pretty. 'Negative Equity' is a phrase that hasn't been heard for some time but one which is sure to grace the UK newspapers over the coming months. If you are a bank executive you must be losing more sleep than ever.

The problem for many banks is they gorged on the housing market. Self-certification loans may prove to be a disasterous product for the banks and the homeowner, buy-to-let loans are certainly fragile. On this point many argue that people still need places to live and rents will continue, this is very true, but a lot of people leveraged themselves heavily and any rise in the interest rate could prove overwhelming. Passing on interest rate rise through rent is not an easy task.

The greater problem for this sector, and the housing market in general, is if the army of buy-to-let landlords start to de-leverage. Drops in house prices at the moment are, in some part, inevitably the result of some of this going on, but an increase in the sale of multiple homes would be a disaster.

Enter Bradford & Bingley. Assuming it succeeds in raising its £400m capital injection from shareholders it will be, in the words of its executive chairman Rod Kent, 'one of the best capitalised banks in Britain'.

It's going to need to be. Given the profile of its lending (buy-to-let, specialist loan books and so on) it could be one of the worst hit for arrears and further losses and write downs on bad debts. It's going to need the capital it's raising now, not to give it a chance of weathering the onslaught to come, but to give it breathing space until a takeover can be agreed or a run off of its business arranged.

Back in June 2007 James Hamilton, a banking analyst at Numis said "A lot of people have made very good money in the past from buy-to-let. But if the housing market goes flat, there is every likelihood that many of them will want to sell up."

Hamilton warned that there were massive potential problems because many individuals have invested huge amounts of their total wealth in buy-to-let. 'Some retail investors have taken the very high risk strategy with such a high concentration of their money in a single asset class.

At the time a source 'close to Bradford & Bingley' said "'Hypothetically he's right, but that's not what the trading statement is saying. Of course, if the buy-to-let market goes into meltdown B&B would be in trouble but then we'd all be in trouble."

A prophetic statement with hindsight.....

New Commuter Service Trailed In Chile......

What a great idea to brighten up the commute. Only problem is you can't get a newspapare open in rush hour in London, so where a dancer would fit I don't know.

Perhaps if we lobby Boris The Mayor enough we could have this service provided on the tax payer?

Monday, July 07, 2008

Recession.. Glass Half Full?

After seeing Hamilton win the Silverstone Grand Prix at the weekend I was in a pretty good mood today and then I made the mistake of reading the news and I must admit my cautious optimism is floundering.

These were some of the opening lines I have read today:

"The great oil shock of 2008 is bad enough for us. It poses a mortal threat to the whole economic strategy of emerging Asia."

"Last week the seriousness of our economic predicament became palpable. There was a string of bad economic news but for many people what really struck home was the company news."

"Companies such as Tanfield, which have had their share prices puffed up during a bull market, typically see their stock tumble when economic conditions deteriorate and investor sentiment turns for the worse. Aim is riddled with Tanfields and these companies are in for a very tough time over the coming months."

In a depressing round of news I have read about the AIM market on the point of implosion, China ready to 'blow up' because of the oil price and the UK housing market is melting down along with the prospects for huge unemployment. The worst news of all is that this will go on for the next five years!

It is hard to argue with some of the analysis that goes behind these stories but some you take with a pinch of salt. What is making the difference for me at the moment is the general feeling you get talking to everyday people. My wife is astonished at the rise in prices across the food sector. She is a very good cook (which accounts for my wasteline) and publishes a blog of her recipes. This blog is infinitely more popular than mine and gets about 10,000 hits/ month. It has become an interesting barometer of the 'housewife' market. A year ago such recipes as 'Beef Wellington With Truffle Sauce' were among her top posts, now she is seeing the top posts amongst 'low-cost' meals.

I am sure this method of market analysis will not enable me to start a hedge fund off the back of it, however, it is one indication that hits home in real terms.

Regular readers may know that I have just bought an SUV (doh!..I know). I have owned a string of environmentally unfriendly cars and have never concerned myself with gas prices. Having just seen the gas price here go from CHF1.80 to CHF2.02/litre in just two weeks, it is hitting home. I have even done the maths on taking my boy to school vs school bus... Costs me CHF1500 a year to take him vs CHF650 on the bus. Next term he takes the bus.

I bought a Skype/Landline phone. Basically it replaces our home phone and home office phone and is connected to my Skype account. This will save about CHF300-CHF400 per month. A fair chunk of change.

Articles in newspapers across the board show similar concerns for people in their everyday lives.

Andy Woods a local hotelier and brewer in Suffolk says "I think people's moods have changed. I think they are becoming more concerned about how they provide the basics in their lives. East Anglia, and Suffolk in particular, are very rural economies. We have lots of businesses in rural situations, and throughout East Anglia we are seeing fewer cars on the roads, for instance. That's just one example. There are fewer people going to pubs and they are also spending on different things."

Sarah Ramsay, 23, a PA from Croydon, says: "I'm worried about how expensive my sandwiches are. I've definitely noticed a difference in food prices. I'm making my own sandwiches now or going to a supermarket like Sainsbury's down the road."

"I think it's good quality stuff in Marks & Spencer, the sandwiches are a lot better than the big four supermarkets. But I'd rather bring stuff from home for lunch to save money," says Will Dawson, 24, from London.

UK householders were last week warned, by the Bank of England no less, that living standards will have to fall for at least a year and by the Organisation for Economic Co-operation and Development (OECD) that redundancies will grow by 100,000 over the next two years. Oil on Friday hit yet another high at $145.85 a barrel, adding to inflation and squeezing incomes further. Not surprisingly they're now asking just how long will this slowdown last and how bad will things get?

I think the answer, sadly, is much, much worse. I remember trying to explain to younger friends who have gorged on property as their route to riches, that there was a time, not so long ago, that you could not 'give' property away.

Houses that a couple of years ago were on the market for millions were on the books of estate agents for months on end at a price of £200,000 in the early nineties. The response from these friends, which is perpetuated by housing and makeover shows, is 'you should have bought it. property never goes down'. Clearly I should have bought it, but sold it when these guys entered the market. This will be a hard lesson for some people in the housing market.

We wrote an article here back in October discussing how hedge funds were shorting the housing market and how 'buy-to-let' was a disaster waiting to happen. We take no joy in being right and make no claim to have prophesized it... the writing was on the wall from many newspapers and market commentators.

But like any crazed market, from tulips to tech stocks, the housing market in the UK had to see a dive.

OK.. so I have depressed myself and, no doubt, you enough so where is the good news?

Well the good news is this. We are seeing a correction, a full-on pressing of the panic button across the whole market. I do, however, prefer to see it as a 'restart' button.

How many of you have watched in awe at the rise of the markets? How many of you have looked with envy at the profits made by hedge funds and investors over the last few years and kicked yourself that you weren't in the game? How many times have you looked back at just how much cash you would have made if you had invested in this company or that company, or bought yourself a portfolio of property?

Well, my friends, just like my son pressing the 'restart' button on a game he losing, we are there now.

Banks, property, tech, everything is dropping like a stone, back to levels not seen for years and this opens opportunities that I was unsure that we would see again.

The credit crunch has created a time machine, rolling back prices of stocks and assets, it has sanitized the markets of the raving punters who have overvalued stocks to the point where value disappeared and it has given us all a second chance.

Doom and gloom maybe rife, but I remember the words of an old client who made a fortune from contrarian investing;

"There is always money to be made in a war zone" he was fond of saying.

Call it recession, correction or crash, one thing is for sure, we are in a financial war zone and the stories we will tell on this blog in a couple of years time will be of those who looked at the 2008 glass as half full....

Tuesday, July 01, 2008

UBS On The Front Line Of The 'Tax Wars'

I make my report from under a my desk, via satelite phone, risking my very life to bring you the latest from war torn Switzerland. We are hearing from the troops that a captured ex-banker has been interogated by the US tax special forces known as the 'IRS' and after a brave few minutes of resistance has spilled the beans.

Having wilted under the barrage of $39bn of US Toxic Mortgages our hero, UBS Bank, is now under constant attack and we fear the worst. Sketchy reports from intelligence, within enemy territory, tell us that a faction of the 'Federal Prosecutors Office' in Miami is to launch a strike on the Zurich head office of UBS in the form of a summons.

With a background of previous cordial relations between the two countries the summons is all the more frightening as it will be the first such action against a foreign bank. The summons is aimed at UBS revealing the names of 20,000 of the US's own citizens who have alledgedly used the services of UBS to hide money from the rampant IRS forces.

An expert on offshore banking in the US doesn't hold out much hope for named individuals and believes all is lost "The bank is in a very difficult position," Blum said. "If I were advising clients, I'd tell them to come clean; the people who come clean early will probably be allowed to get off with paying the tax, the interest and the penalties. Others could very easily face criminal prosecution."

UBS have been caught up in the 'War on Taxes' and are evidently on the list of the 'Axis of Evasion' targetted by the IRS. It appears that old allies and foes alike are joining forces to put paid to the 1000 years of peace in our country by declaring war on the very center of the country's tax and banking system.

First we saw the UK Tax Mafia forcing banks who had branches in the UK to give over information on individuals who held offshore accounts, this resulted in 50,000 souls giving up their banking information to the Men In Biege without so much as a fight.

Formidable forces were then mobalised in Germany with a first strike on Lichstenstein being waged by the secret police bribing an ex-bank employee to fess-up the names of all account holders. He did so for a new identity and six million Euros. This battle is ongoing on the borders of Switzerland but it is only a matter of time before the focus is aimed squarley in our direction.

Reports are also coming in that initial resistance fighters known as 'lawyers' in the US have pretty much folded and UBS are working with the IRS to resolve the accounts issue.

John 'Mad Dog' DiCicco, deputy assistant attorney general in the Justice Department's tax division, said in a statement that the U.S. has been "working cooperatively" with UBS and the Swiss government to obtain the account information.

An un-named source added "I love the smell of ruined fondue in the morning, it smells like victory"

Switzerland has steadfastly resisted calls from Europe and the US to revise its tax structures and banking practices saying they are 'not up for negotiation' but here on the ground we are concerned that international attacks will sap the will of our troops.

An unamed Swiss resistance fighter is calling on the Swiss to fight back. In a stirring speech he said:

"I have, myself, full confidence that if all do their duty, if nothing is neglected, and if the best tax arrangements are made, as they are being made, we shall prove ourselves once again able to defend our banking system, to ride out the storm of war, and to outlive the menace of tyranny, if necessary for years, if necessary alone.

Even though large tracts of Europe and many old and famous States have fallen or may fall into the grip of the IRS and all the odious apparatus of Taxation Rules, we shall not flag or fail.

We shall go on to the end, we shall fight in the Alps,
we shall fight in the lakes and rivers,
we shall fight with growing confidence and growing strength on the Internet, we shall defend our system, whatever the cost may be,
we shall fight in the mountains,
we shall fight on the fondue shops,
we shall fight in the fields and in the streets,
we shall fight in the watch shops;
we shall never surrender,

Stirring stuff.

As I report here, the situation does indeed look dire, but if history has taught us anything, might is not neccessarily right.... Pray for our souls dear friends..... until next time.... Asset Manager... signing off.