![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
Equity, is it all an act?
Feb. 16th, 2009 12:26 pmI see that it was October 13th 2008 when I said that "somewhat surprisingly, the Lloyds/HBoS deal is not dead" and observed that the taxpayer might not be getting such a good deal out of it as, for example, the RBS rescue.
That's as may be, but Mr Taxpayer was cearly getting a better deal than was the Lloyds TSB shareholder, who seems to have been royally stiffed. If this was the US the class action suits against the Lloyds board would already be in place.
In a bit of a "hold my hands up" moment, I ought to add that at this time I thought that the taxpayer was getting a good deal on RBS. My error there was just to look at the derivatives. The downfall of RBS is based in wider matters than that and has closer links to the Savings & Loan collapse in the US in the late 1980s. Too much money lent to buy-outs (or commercial poroperty companies) that now appears to have gone down a black hole.
+++++++
A few insurers have come out with rights issues in the past week, pointing out that the insurance market is hardening and that there is a shortage of capital that the capital markets can't fill (a big difference to the aftermaths of 9/11 or hurricane Katrina). You have to wonder, though, at the sagacity of a system whereby insurers (and other companies) launch share buyback schemes when there is nothing better to do with their money (i.e., by definition, at the top of the market ) and then launch rights issues when they have lots to do with their money (by definition, when the market is depressed). What's incredible is that, in a Catch-22-ish kind of way, it makes sense to buy at the top and sell at the bottom, because when you are buying you are comparing with what else you can do at the time with your money, not comparing it with what you might be able to do with the money in a year's time.
John Coomber, last head of Swiss Re but one (they have a record on a par with Chelsea ever since Kielholz retired) said at a press conference, back in 2005 or thereabouts, that I wish I had taped, that Swiss Re was buying back shares because "capital is always available to companies with a solid reputation". It was the most staggering display of hubris and economic idiocy that you could dream of. And yet, in a way, his strategy was right (even though his explanatiuon wasn't). Since return on equity is everything, you can't shove that capital under a mattress when, by buying back shares, you "save" yourself 4% a year in dividend payments. The flaw in the line is the belief in the permanent liquidity of capital. The sole reason that I didn't pay off part of my mortgage rate last year (effective return this year by so doing, 5.89% tax free) is that I knew that I couldn't automatically assume that I would be able to borrow it back if I needed it. As a private company without shareholders, PJBirks PLC can take this "more than one year" view, but accountancy rules make companies measure their performance year by year. There's no real facility for saying "we are taking a zero return this year with this cash, because we might need it next year". Well, there is, but it doesn't go down well with institutional investors.
++++++++
Still feeling good, but I also had the retching this morning, clearly indicating some residual stress levels that I have to try to deal with. I'm tidying up some of the stress matters, and telling myself (in a calm fashion) that none of it really matters in the grand scheme of things. This is working well.
Oh, and crucified both Stars and
That's as may be, but Mr Taxpayer was cearly getting a better deal than was the Lloyds TSB shareholder, who seems to have been royally stiffed. If this was the US the class action suits against the Lloyds board would already be in place.
In a bit of a "hold my hands up" moment, I ought to add that at this time I thought that the taxpayer was getting a good deal on RBS. My error there was just to look at the derivatives. The downfall of RBS is based in wider matters than that and has closer links to the Savings & Loan collapse in the US in the late 1980s. Too much money lent to buy-outs (or commercial poroperty companies) that now appears to have gone down a black hole.
+++++++
A few insurers have come out with rights issues in the past week, pointing out that the insurance market is hardening and that there is a shortage of capital that the capital markets can't fill (a big difference to the aftermaths of 9/11 or hurricane Katrina). You have to wonder, though, at the sagacity of a system whereby insurers (and other companies) launch share buyback schemes when there is nothing better to do with their money (i.e., by definition, at the top of the market ) and then launch rights issues when they have lots to do with their money (by definition, when the market is depressed). What's incredible is that, in a Catch-22-ish kind of way, it makes sense to buy at the top and sell at the bottom, because when you are buying you are comparing with what else you can do at the time with your money, not comparing it with what you might be able to do with the money in a year's time.
John Coomber, last head of Swiss Re but one (they have a record on a par with Chelsea ever since Kielholz retired) said at a press conference, back in 2005 or thereabouts, that I wish I had taped, that Swiss Re was buying back shares because "capital is always available to companies with a solid reputation". It was the most staggering display of hubris and economic idiocy that you could dream of. And yet, in a way, his strategy was right (even though his explanatiuon wasn't). Since return on equity is everything, you can't shove that capital under a mattress when, by buying back shares, you "save" yourself 4% a year in dividend payments. The flaw in the line is the belief in the permanent liquidity of capital. The sole reason that I didn't pay off part of my mortgage rate last year (effective return this year by so doing, 5.89% tax free) is that I knew that I couldn't automatically assume that I would be able to borrow it back if I needed it. As a private company without shareholders, PJBirks PLC can take this "more than one year" view, but accountancy rules make companies measure their performance year by year. There's no real facility for saying "we are taking a zero return this year with this cash, because we might need it next year". Well, there is, but it doesn't go down well with institutional investors.
++++++++
Still feeling good, but I also had the retching this morning, clearly indicating some residual stress levels that I have to try to deal with. I'm tidying up some of the stress matters, and telling myself (in a calm fashion) that none of it really matters in the grand scheme of things. This is working well.
Oh, and crucified both Stars and
