Top 10 links: Michael Lewis' fantastic piece on Wall St; CBA's profit warning; 'Cash for trash' bad banks
3rd Feb 09, 12:30pm
Here's my top 10 news links from reading around the Interweb in the last day or two. I welcome your gems below in the comments. Please read this One of the reasons I do these Top 10 links when I get a chance is to force me to read more widely than my own email box. Sometimes I find some real gems. This piece from Michael Lewis is the best thing I have read all year. It should inspire anyone thinking of becoming a financial journalist. But it was written by a former investment banker and is so much longer than any decent article should be. Yet it is so worth putting aside half an hour to read it. Please read this. It explains the Credit Crunch with some compelling detail. It is thrilling, shocking and poignant all in one article. And it's all about complex financial instruments that no one understood at the time, but that are now pushing the world to the brink of depression. Did I say please read this? Just in case. Please read this. Dirty white shoes The property group behind flamboyant Gold Coast property developer Jim Raptis has collapsed under almost A$1 billion of debt, much of it owed to the extraordinarily unlucky (perhaps) Halifax Bank of Scotland International, says The Australian. Those with sharp memories may recall HBOS is the lender behind Strategic Finance, Geneva Finance and various other failed property developments in New Zealand. Why bad banks are risky The New York Times has an excellent piece on why the US plan to set up a bad bank may be a bad idea because it allows the banks to flick toxic assets to the taxpayer at unrealistically high prices. My gut feel is that the US and UK governments should simply seize these banks, clean them up and get them lending again. They're worth nothing. Shareholders should be wiped out rather than taxpayers. The management of the ex-investment banks in particular are so compromised with all the bonus distrust that it's not worth the political risk. Obama risks blowing his political capital protecting a bunch of Wall Streeters. Just nationalise them. Dairy farmers should invest in Russia... Staples Rodway is spruiking a joint venture investment in a Russian dairy farm. Oy Vey. This is their announcement in Scoop. Has anyone explained the concept of political risk to a bunch of dairy farmers? Someone better had. Goldman Sachs has a cunning plan The Big Picture blog has revealed a proposal put forward by Goldman Sachs to Obama's Treasury people suggesting (essentially) that the government lend investment bankers "non recourse" money to set up privately owned bad banks that buy toxic bonds from investment banks at inflated prices. These people have no shame. It is 'socialise the losses and privatise the profits on a gigantic scale. Here comes the lolly scramble Governments around the world are planning big spend-ups to revive the economy, which means lobbyists have never been so busy putting dusty ideas under the noses of politicians and bureaucrats. The often excellent Alan Kohler at Business Spectator points out the lolly scramble is about to begin in Australia. I'm sure the phones and expense accounts are running hot in Wellington. Commonwealth Bank warns of lower profits The Australian bank that owns ASB has warned first half net profits will fall 16% to around A$2 billion, but that this was 20% ahead of market forecasts. Here's the full statement, although there's no specific New Zealand comments. Rewarding failure The sometimes interesting and often incendiary Michael West at the Sydney Morning Herald (He's ex The Australian) points out Bad Banks, including the Rudd Bank, reward failure and essentially transfer risk to taxpayers and allow shareholders and management to get on with making big profits and taking big bonuses. Again, I say, just nationalise them. In the Australian case I wonder whether Rudd Bank is necessary to rescue Jim Raptis et al. Just let them die. Stiglitz says a bad bank is just plain bad Joseph Stiglitz, a Nobel prize winning economist we interviewed last year, has come out in opposition to President Obama's move towards a bad bank. He says it's just throwing bad money after good and leaves the taxpayer with a massive debt. I couldn't agree more. Here's the report on Bloomberg. Our interview with him last year is below. Rich buggers are just cheap I love this story. The bastion of conservatism and protector of the rich in Britain, the Financial Times, is suing masters of the universe hedge fund group Blackstone for encouraging staff to use a single logon to FT.com to save money. How embarassing. No doubt, this is why the story is in Timesonline. Glorious Gideon The world's worst central banker, Gideon Gono, has hacked another 12 noughts off the Zimbabwean dollar. This is just 4 months after knocking 10 noughts of the Zim dollar. Now Gordon says this about what's happening in the rest of the world. It's priceless. Thanks to Timesonline for this.
I had to print money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the US to please print money. The whole world is now practising what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.