Tuesday, September 30, 2008


Andrew Hill has a good piece in today's FT:
"If you owe the bank $10, it's your problem.
If you owe the bank $10m, it's the bank's problem.
If you and a million others owe the bank $10 each, it's still your problem - but now it's also the bank's problem.
If the bank then sells to an investor the $10 you owe, it ought to be the investor's problem. But if you have a problem repaying the $10 and the bank insured the investor against your problem, then it's both the investor's problem and the bank's problem.
Your problems and your neighbours' problems mean the bank now owes another bank $10bn. That is both banks' problem. But if banks can't or won't pay the $10bn they owe to other banks, it's very quickly a $700bn systemic problem.
And if the government then owes the banking system $700bn, it's your problem."

Good men

All this talk of finding 12 good Republicans to pass the US bail-out package reminds me of the trailer for Valkyrie with Tom Cruise saying, "God promised Abraham that he would not destroy Sodom if he could find just ten righteous men."

Monday, September 29, 2008

Rod Kelly

I met a GP-jeweller at the weekend who was telling me about the silversmith Rod Kelly. There was an article about his work in Country Life and an elderly lady rang to compliment him on his talent. She called back 6 weeks later and said she was a retired school teacher and had been thinking about him and had decided to commission him to make her a silver beaker with a dandelion design. He did this and posted it to her and she rang him again to thank him. She used to call him every couple of months to say what pleasure the beaker gave her and how much she enjoyed drinking whisky from it and then he received a letter from a solicitor saying that she had died and that she had bequeathed the beaker to him in her will. He wrote back to refuse, insisting that one of her relations should inherit it. Her family, however, had the final word: she had been adamant that it should be returned to the craftsman. It is one of only a handful of pieces which he keeps for himself.

Friday, September 26, 2008

Turin shroud

I went to a talk last night by Fr Martin Haigh, a Benedictine monk from Ampleforth who has studied the Turin shroud for 50 years. There is no time now, nor do I have sufficient knowledge, to go into all the arguments for and against it being the shroud which covered the body of Christ in the tomb after the crucifixion. Fr Martin showed us a DVD which he had made on the subject and invited us to make up our own minds. What was remarkable was seeing the image of the negative of the first photograph taken of the shroud in 1898 next to the image on the shroud (apologies for not being able to display the images on this blog but you can see them at http://en.wikipedia.org/wiki/Shroud_of_Turin). It is extraodinary that the outlines of the face could have been transposed onto the shroud in the first place but even more extraodinary what they reveal when the mirror image is reversed once more. This shroud is usually only displayed once every 30 years in Turin but the current Pope has ordered that it should next be exhibited in 2010.

Thursday, September 25, 2008

Strategic assets

They are desperate for cash, even so one has to wonder about the merits of the Government sale of its 35% stake in British Energy to the French. I suppose they may be able to get round it in the same way as they got round selling all the airports to the Spanish: by changing their mind about monopoly ownership of strategic assets. Perhaps they will say later that the quid pro quo for BE is that all the UK's nuclear waste must be buried in France?

Buffett and Goldmans

The FT magazine is doing a serialisation about the life of Warren Buffett and last Saturday described how the young Buffett in 1940, aged 10, was taken to Wall Street by his father and introduced to a partner of Goldman Sachs, Sidney Weinberg. Buffett's father was a local stockbroker in Omaha and in those days the stockmarket was open for a couple of hours on Saturday mornings and Buffett junior used to go into the office with his uncles and look at the share prices. When Sidney Weinberg was showing the father and son out of the Goldman offices, he leant over to Buffett Junior and asked him what was his favourite stock. Buffett was deeply impressed by this interest in his ideas and never forgot that moment. How amazing that 68 years later Warren Buffett is bailing out Goldman Sachs. Let's wait and see if this proves to be one of the best deals of his career. It was described thus by a senior Golman executive, "Warren Buffett is the gold standard. You are telling the market you are cashed up with the guy who is considered the smartest in the world. The message is you are here to stay. It is a form of cheap insurance."

Wednesday, September 24, 2008

More time with the family

Ruth Kelly's announcement was disappointing today. "Spending more time with the family" sounds such a limp excuse. If that is indeed her true reason for stepping down, she could have given it some more colour, such as "the need to spend more time on homework than on House work" or "one just can't get the domestic staff these days."
At least Boris isn't boring. Three cheers for his attack on the Labour "neo-socialists"!

Tuesday, September 23, 2008

Thai politics

I had lunch with my favourite Thai water company today and the conversation turned to politics. Thais have been demonstrating outside Parliament since May to protest against the Prime Minister Samak who was also working as a chef on TV (just imagine if we had to watch GB making Brown Sauce on TV!). He was forced to resign but the new PM, Somchai, although having been an excellent Minister of Justice in the past, is hampered by his wife who is not only the sister-in-law of Thaksin Shinawatra (erstwhile owner of Man City) but also under investigation for being "unusually wealthy". I'm not sure which country's politics is more complicated: Thailand or Malaysia?

Monday, September 22, 2008

Dulce et decorum est pro patria mori

One of my lunch guests on Saturday was a Wykehamist who volunteered to give our party a tour of the old school. Term had already started so it was shut to visitors and we were lucky to have the place largely to ourselves as most of the boys were out on the sports fields. We listened to the organist practising in the chapel and spotted the occasional scholar, gown on, rucksack on his back, his trousers two inches too short, scurrying towards the library.
As a product of an all girls education, I am always struck by the war memorials at boys schools. Winchester has these in style. In the corridor outside the chapel there is the memorial to the 13 old boys who were killed in the Crimean War with the inscription, 'Think upon them thou who art passing by to-day, child of the same family, bought by the same Lord. Keep thy foot when thou goest into this house of God, then watch thine armour and make thyself ready by prayer to fight and to die, the faithful soldier and servant of Christ and of thy country.' Then there are two cloisters, one purely commemorating the old boys who were killed in the First and Second World Wars, and the other with inscriptions remembering boys from the 1400s to the present day, including one boy who'd been killed at school by a piece of masonry falling on his head while he was engrossed in reading Livy. He was supposed to go to Oxford but went to heaven instead.
A new school building was erected in 1687 and this now houses portraits of old Head Masters, William of Wykeham and a table of school laws. There also hangs the school motto, "aut disce aut discede" ("either learn or leave") with an added twist, "manet sors tertia caedi" ("or there's a third option: be flogged").

Friday, September 19, 2008

The New Age

My colleague came in to the office this morning and announced, "So here we are in a new era: capitalism with socialist characteristics!"

The Bank of England

Short-selling was first banned in England in 1697 when Parliament prohibited people from short-selling shares in the Bank of England. The Bank of England was created in 1694, a year after the control of government finances had been handed over to Parliament, as a temporary institution on an 11 year charter which could then be dissolved on a year's notice. In fact the charter was never dissolved but renewed 9 times by Parliament until 1844 when the Bank Charter Act formalised its role as manager of note circulation and separated that role from its general banking business.
The initial 1694 charter of the Bank provided for a loan of £1.2m to the government at an interest rate of 8%, secured on custom and excise duties. In the beginning, it did not enjoy a privileged position as the government's banker, nor were its notes legal tender; its main role was to provide funds for the war against France.
In 1695 Parliament chartered a rival Land Bank which never took off as the capital could not be raised. The idea of this caused such outrage within the Bank of England that it insisted on a rechartering in 1697 which contained the clause, ‘‘no other Bank or Constitution in the nature of a bank be erected or established, permitted or allowed by Act of Parliament during the Continuance of the Bank of England.’’ Bank stock was used as collateral by Parliament to take on other loans and for this reason short-selling of Bank of England shares was banned.

Wednesday, September 17, 2008

Chinese song of the day

"The Four Clears and the Four Unclears"

Why hold a meeting? -- Unclear
But who sits in what seat? -- Very clear
Who brought which gifts? -- Unclear
But who brought no gift? -- Very clear
Whose work has been good? -- Unclear
But who will be promoted? -- Very clear
Who went to bed with the leader? -- Unclear
But what was done there? -- Very clear

Tuesday, September 16, 2008

Hubris and nemesis

Today's FT quotes an interview it had given to Dick Fuld, Chairman and CEO of Lehman's, in 2001. They asked him whether its $7.2bn in equity was sufficient for an investment bank. He replied with a story about playing blackjack in Las Vegas in the 1970s when he was a young bond trader at Lehman's. He said he was joined by a high-roller who was having terrible luck. Every time the high-roller lost, he doubled his bet, which impressed young Fuld. "That's the answer," he thought, "Get enough capital and double up." But as dawn neared and the high-roller's losses mounted to several million dollars, Fuld said he felt sick to his stomach. "I don't care who you are," Fuld remembered thinking, "You don't have enough capital."

Monday, September 15, 2008

Lehman contagion

Not a great day to come back to the office with markets tumbling. At least the Hong Kong market is shut today which numbs some of the pain. The list of unsecured creditors to Lehmans gives some idea of the global impact of its bankruptcy on the banking sector. The largest unsecured creditors are bond holders at $155bn. Then follow:
Japanese banks $1.8bn
European banks $665m (BNP, KBC, Lloyds & Standard Chartered)
Bank of Nova Scotia $93m
Australian banks $91m
Taiwanese banks $84m
Bank of China $50m

Thursday, September 11, 2008

Chinese churches

I'm now in Hong Kong but when I was in China I went on a 3 hour drive from Fuzhou to Xiamen and was struck by how many new churches I saw along the way. I remarked upon this to the German engineer and he said there were many missionaries in the area. He said the one child policy (which is now more relaxed) has had the effect of concentrating people's minds on making money and that the younger generation is looking for a spiritual outlet. They reject the traditional Buddhism of their parents and many are converting to Christianity, partly simply to rebel against the old values.

German work ethic

I met a German engineer at one of the Chinese factories I visited. He's lived in Xiamen for two years. I asked him if he thought he'd ever go back to work in Germany.
"I'm not sure," he replied. "German companies don't like employing people who've been working in Asia because they fear they've lost the work ethic."
"Surely your work ethic could not be in doubt?" I said. "You start work at 8am and finish at 9pm."
"They'd say I must be a very inefficient worker if I have to work such long hours. My boss at my previous company in Germany had a phrase, 'Stress is only known to those who are weak in performance.'"

Tuesday, September 09, 2008

Chinese language

The Chinese tend to pronounce bs as ps which is where the word Pidgin, as in Pidgin English comes from: it derives from the word "business" via the intermediate mispronunciation "pidginess". This was brought home to me today when I was talking to a cab driver in Singapore. He told me that the Chinese word for "yes" is "sir" and "no" is "poosir", describing it thus, "The Chinese word for 'no' is 'poosir', just like 'bush', President Bush: we call him President Poosir!"

Monday, September 08, 2008

Chinese food

I'm in Singapore and was having lunch at a Chinese restaurant today where my host asked me to choose a pudding. We'd already had a good selection of dim sum so I thought I'd go for something light and opted for the Chinese herbal jelly. I was expecting it to be green. It was black. "What sort of herbs are in this jelly?" I asked. "Oh, there are no herbs in it," my host replied, "It's made from ground turtle shells and is illegal in a lot of countries." I told him that I was on my way to China and he advised me to watch out for exotic meats on the menu, although it is too early in the year for cat and snake stew. The last time he'd been there, he'd gone to a Japanese restaurant where he ate horse sashimi.

Thursday, September 04, 2008

The beauty of geometry

I have been reading a book about the Golden Ratio and was amused to come across the following quotation by Bertrand Russell: "At the age of eleven, I began Euclid, with my brother as my tutor. This was one of the great events of my life, as dazzling as first love. I had not imagined that there was anything so delicious in the world."

Wednesday, September 03, 2008

What's in a name?

I had a meeting yesterday with an American company and the host broker gave this introduction, "Welcome everybody and thank you for coming. Let me hand you over to Randy, the Chief Executive, who will run through the presentation." The CEO did not look pleased. He explained, "Actually, my name is Randall over here. I was in the navy and once visited a pub in Portsmouth where the sailors told me the British meaning of Randy, so please call me Randall."

Tuesday, September 02, 2008

Japanese broking

I'm going to London today for meetings and am looking forward to drinks this evening with an old friend who invests in Japan. Seasoned Japanese fund managers, as we call them (they may not be Japanese, they simply invest in Japan) are an interesting breed, having experienced a rocket fuelled bull market and then having lost everything in a protracted bear market which pretty much wiped out most of their enthusiasm for life. This year the market has picked up a bit so I expect my friend will be quite perky, particularly as our other friend will be picking up the drinks tab. One of my old colleagues, Nobby, used to broke to a Japanese fund manager who was rather a prickly character. He used to insist that Nobby called him at 6.45am, at which time he would be in his early morning bath. Nobby would tell him the highlights of what had been happening on the Tokyo Stock Exchange that day. One day one of the analysts was pushing Sony after visiting the company. "Sony looks very good value: you really ought to buy some," Nobby said. There was much splashing of water at the other end of the phone. "Sell me a million," came the reply. "I said we're recommending it as a buy, " spluttered Nobby. More splashing, then, "Sell me a million!" and he hung up.

Monday, September 01, 2008

Darling Darling

Today's FT has a damning leader about Alistair Darling. His claim that the UK economy is in the worst shape for 60 years is nonsense. Unemployment and inflation are still low. There is no prospect of introducing a three day working week or seeking a bail-out from the IMF. His hyperbole about the economy is juxtaposed by his understatement about the performance of the Government which he describes as "not doing ok." He's obviously fed up with taking over GB's poisoned chalice but even so he has himself to blame for the nationalisation of Northern Rock and the indecision about cancelling stamp duty for first time buyers and imposing windfall taxes on energy companies. My bet is that both he and Jacqui Smith will be dumped in the next Cabinet reshuffle, if indeed GB makes it that far.