Wednesday, July 31, 2013

Net Worth Update (July 2013)

Current Net Worth
% change
Savings Account 1
Savings Account 2
Savings Account 3
Investment Linked Fund
Schroders Commodity Fund
Stock Holdings
Phillip Money Market Fund
Physical cash
Market Value Of BTO Flat (to be built in 2016/2017)

Total Assets


Home Loan

Net Worth (including flat to be built in 2016/2017)
Investible Net Worth

  • Additional income from GST voucher, reservist allowance and Singpost dividends.
  • Market staying stagnant resulting in little changes to the value of my investment holdings.
  • Total expenses for the month of July is about $700, a significant increase from my schooling days where I diligently maintained a budget of $10/day.
  • $47,000 or about 63% of my investible net worth is now in cash/cash equivalents. This war chest should be ready for any unexpected downturn in the market. As major expenses (wedding and house) will be incurred in 2016/2017, a comfortable portion of my investible net worth should be set aside as cash/cash equivalents.
  • Biosensors will be distributing dividends for the first time in August. Need some major market movements to utilize my war chest and increase my passive income significantly. For now, cash is a position.

Tuesday, July 30, 2013

Barclays £12.8BN Hole

Barclays has gone cap in hand to its shareholders today for £5.8BN via a rights issue, in order to help it plug a £12.8BN capital shortfall arising from the new Prudential Regulation Authority (PRA) imposed safety buffer.

The Telegraph reports that rights issue will allow existing investors to buy one new share for every four they currently own at a price of 185p, a discount of 40% to they bank's closing share price yesterday. 

Barclays will also issue £2BN of bonds that are turned into shares or wiped out if the bank gets into trouble.

Additionally in its six months results for the first half of this year, Barclays has set aside £1.35BN against further PPI claims, bringing its total compensation fund to just under £4BN, and a further £650M for interest rate swap redress, increasing its provision to £1.5BN.

Barclays chief executive Antony Jenkins is quoted by the BBC, in a dig at the PRA, warns that plugging the hole will have a negative impact on the economy:
"It means Barclays will provide fewer financial transactions to big companies, life insurers and pension funds, inter alia, to help those giant institutions reduce their risks. And to be clear that will represent a tightening of credit for those customers, so there may be a negative economic impact."
Barclays share price is currently down 7% on the day.

Monday, July 29, 2013

Ever Rising Energy Bills

Ed Davey, the Energy Secretary, has pleaded with energy companies to explain their profits ie to be more "transparent".

Ofgem has also been criticised in a report by MPs on the Energy Committee, for failing to do enough to tackle profiteering by energy companies.

That's all very well, up to a point. However, the MPs seem to forget that taxes and green energy surcharges also add to the financial burdens of the hapless energy consumers.

Sunday, July 28, 2013

Book Review: Bailout by Neil Barofsky

I recently finished reading Neil Barofsky’s book Bailout. This is the autobiographical tale of how a prosecutor from the U.S. Attorney’s Office in New York City ends up monitoring the spending of the greatest private sector bailout this country has ever seen -- that of the giant Wall Street banks that started in 2008.

I almost didn’t buy this book. By now, I’ve read so much (books, magazine articles, blog posts) about the financial crisis, that I feel like my cynical carapace has grown a cynical carapace. But I liked the idea of getting a fresh perspective, and I’ve enjoyed some of Barofsky’s commentary on the Internet.

So, in slideshow deck fashion (without the actual annoying slideshow deck), here are six impressions of Bailout and its message.

1. Geez, was Barofsky really that naive?

He often comes across as a bit too earnest and wide-eyed and incredulous, like he’s starring in the regulatory version of “Mr. Smith Goes to Washington.” Or maybe, again: I’ve just gotten really, really cynical.

2. Surprise! Politicians are the good guys, more often than not. Indignant senators and congressmen help a frustrated Barofsky by giving captured regulators and play-it-safe bureaucrats a good swift rump kick from time to time.

Maybe it shouldn’t come as a surprise -- Congress created Barofsky’s office, after all. Still, in an age when regard for Congress hovers between that for a dung beetle and parasitical tapeworm, the revelations are pleasantly dissonant.

3. HAMP (the Home Affordable Modification Program) was an ill-conceived mess from the get go. Strangely, the main flaw was obvious to everyone except apparently the program’s creators. Mike Konczal at Rortybomb, for example, blogged about it several times, such as here.

In brief: Treasury put the mortgage servicers in charge of the program. The incentives of the servicers were at odds with HAMP’s goals. So the program was more or less designed to do a face plant.

4. Funny but sad epiphanies: Barofsky has a great “Hey, wait a minute” moment when then Treasury Secretary Timothy Geithner talks about HAMP. Geithner seems rather pleased with the program’s poor performance, saying it has “foamed the runway.”

It “foamed the runway” so the plane won’t crash. But who’s onboard the metaphorical plane? Barofsky realizes it’s not millions of homeowners with underwater mortgages. Rather, it’s the Wall Street banks. HAMP “foamed the runway” and gave the banks some breathing room to deal with their bad housing investments.

5. The term “moral hazard” was invoked in a curiously inconsistent way.

The suggestion to help homeowners with their underwater mortgages prompted officials at the Treasury Department to fret about moral hazard. However that same suggestion, applied to the big banks with regard to shoring up their tattered balance sheets, elicited the exact opposite response. When it came to the Wall Street banks, Treasury couldn’t seem to get the bags of cash out the door fast enough. In fact, the crowning irony was that Treasury hesitated to put conditions on the banks related to the funds they received, for fear they wouldn’t accept the money. Meanwhile, homeownevers had to jump through all kinds of hoops just to get trial mortgage modifications.

6. And then there were a few surprises to stir outrage.

The rationale for the bonuses paid to AIG executives -- because they were the only ones who could unwind the complex credit-default swap trades -- is revealed as a farce. A $7,700 payment went to a kitchen assistant and $7,000 landed in the pocket of a mailroom assistant -- both of whom presumably knew as much about default swaps as they did about quantum electrodynamics. Just something else to make the blood boil.

So: My final assessment of Bailout is that it's definitely a good read. It will leave you frustrated and mad (yet again). Much of the terrain is familiar. But I think as citizens we need to keep a high awareness of the many things that went wrong, leading up to the financial crisis and in our response to it.

Thursday, July 25, 2013

UK Economy Grows By 0.6%

The UK economy grew by 0.6% in the second quarter compared to the first three months of the year, according to the Office for National Statistics (ONS).

George Osborne tweeted the following reaction:
"GDP stats better than forecast.Britain's holding its nerve, we're sticking to our plan, the economy's on the mend.But still a long way to go"
However, as I always caution, when it comes to ONS statistics never trust them. They are always out of date and subject to revision.

In the meantime whilst people crack open a can of lager to celebrate the modest signs of economic recovery in the UK, let us not forget that China frets when growth bumps along at a "mere" 7%!

Wednesday, July 24, 2013

Local Lending Data For 10,000 Postcodes

The government have announced that the UK’s biggest lenders will reveal how much they lend at a local level across 10,000 postcodes.

The new data, published for the first time by the end of this year, will allow businesses and the public to see how the banking and building society sectors are serving the wider economy, and in what areas of the UK there less lending.

The data will be published by the British Bankers’ Association (BBA) and the Council of Mortgage Lenders on a quarterly basis and show the outstanding stock of lending that has been committed to customers across three categories:
  • loans and overdrafts to SMEs
  • mortgages
  • unsecured personal loans (excluding credit cards)
Each postcode will be broken down by category to show the exact lending being made to each.

All very well maybe, but why delay it until the end of the year?

RBS Fined £5.6M

RBS has been fined £5.6M by the Financial Conduct Authority (FCA) for "incorrectly reporting transactions they made in wholesale markets".

Seemingly, between 2007 and 2013, RBS either didn't report or incorrectly reported approximately 45 million transactions!

Tuesday, July 23, 2013

China's 7% Bottom Line

China's Premier, Li Keqiang, has underpinned global markets by stating that China’s “bottom line” for GDP growth is 7%, and the nation can’t let growth go below that.

Seven percent is not too shabby at all!

I would note that had a similar statement been issued by the ECB, wrt there being a bottom line for growth for the Eurozone (albeit with a bottom line of growth of far less than 7%), no one would have believed it!

Monday, July 15, 2013

Chinese Growth Falls To 7.5%

As expected China's economic growth slowed to 7.5% in the second quarter of the year.

The Chinese statistics bureau said the slowdown was partially due to deliberate efforts for structural reform and that a slower pace of growth was preferable in the long term.

Sheng Laiyun, spokesman for the National Bureau of Statistics, is quoted by the Telegraph:
"Some measures, including the intensified property tightening campaign, new rules to curb misuse of public funds and the exit some previous stimulus policies, will inevitably have some impact on growth in the short term, but they will benefit our economy in the long run."
Were this any other country such a rate of growth would be considered to be excellent.

The reality is that exceptional levels of growth, such as this, cannot continue indefinitely. Given the size of China and its economy, growth in excess of 7% isn't too shabby at all.

Wednesday, July 10, 2013

One In 20 Households Rely On Payday Loans

The Telegraph reports that the Aviva Family Finances Report published today notes that one in 20 households is "relying" on payday loans to get by.

Two weeks ago the Office of Fair Trading referred the £2BN industry to the Competition Commission, after uncovering evidence of "widespread irresponsible lending".
Last week the Financial Conduct Authority warned that it was considering a total advertising ban on payday loan companies as one of the options when it takes over regulation of the sector next April.

Controls and increased regulation are all very well. However, if hard pressed families who are not well served by mainstream lenders are unable to raise loans from payday loan companies their only other resort will be loan sharks.

Monday, July 8, 2013

The Verdict on Greece

Last week I wrote that Greece had been given a three day deadline to reassure Europe and the International Monetary Fund that it could deliver on conditions attached to its international bailout in order to receive the next tranche of aid.

Unsurprisingly, post deadline, the EU and IMF have given Greece a less than ringing endorsement noting that the outlook for Greece's bailout programme remains uncertain.

Reuters quotes the Troika:
"While important progress continues to be made, policy implementation is behind in some areas.

The authorities have committed to take corrective actions to ensure deliver of the fiscal targets for 2013-14 and achieve primary balance this year.

The mission and the authorities agreed that the macroeconomic outlook remains broadly in line with programme projections, with prospects for a gradual return to growth in 2014. The outlook remains uncertain, however."
As I warned last week, those with money in Greek bank accounts would be advised to withdraw it now before the jackals pounce. 

Thursday, July 4, 2013

Careless Talk Costs Dollars

The Australian Dollar plunged to a three year low following a "light hearted slip of the tongue" by Glenn Stevens the Governor of Australia's Reserve Bank.

His crime?

In a "Ratner" moment Mr Stevens said in a speech on Wednesday that the bank’s board “deliberated for a very long time” before leaving the cash rate steady at its monthly meeting on Tuesday.

This comment caused the dollar to drop to US90.37 cent, and prompted some bank economists to change their forecasts and predict an interest rate cut in August.

In a damage limitation exercise the Reserve Bank insisted that the comment was “light-hearted”, this in turn lifted the dollar and prompted banks to withdraw their revised forecasts.

The bank’s deputy governor, Philip Lowe, was quoted by the Telegraph saying that the financial markets and the media had “misinterpreted” the comments, which were not supposed to be taken seriously.
"They were meant to be a light-hearted remark after what, he [Mr Stevens] reports to me, was a very light-hearted introduction.

I can confirm for you that the board did deliberate for a very long time. I can also confirm for you that it always deliberates for a very long time.”
Professionals such as Mr Steven should know that financial markets do not posses a sense of humour, especially in the current febrile atmosphere!

Tuesday, July 2, 2013

Greece's Day of The Jackal Looms

Reuters reports that Greece has been given three days to reassure Europe and the International Monetary Fund it can deliver on conditions attached to its international bailout in order to receive the next tranche of aid.

Europe and the IMF are unhappy with the progress that Greece has made towards reforming its public sector and improving its tax collection.

In the event that Greece misses the deadline or its promises fail to assuage its "bankers", then as sure as eggs are eggs the "solution" that was foisted upon Cyprus (ie a raid on bank accounts) will be foisted upon Greece.

Those with money in Greek bank accounts would be advised to withdraw it now, before the jackals pounce. 

Monday, July 1, 2013

David Drumm Apologises

David Drumm, ex CEO of the now defunct Anglo Irish Bank, has apologised for the language used in a phone call released by the Irish Independent.

All sorted then!

Happy Canada Day

Mark Carney starts work today as Governor of the Bank of England, ironically it is also Canada Day!