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peterbirksLong-time readers will remember my rants in times past about risk not really disappearing, just being shuffled about and hidden away, with a number of players in the financial world assuming risk that they didn't know they were taking.
You can see how it goes. Secondary bank sees primary bank making a lot of money from proprietary trading. Secondary bank thinks "this must be easy". Sets up its own proprietary trading desk. Gets lucky for a while. Thinks it's good at this game. Increases exposure. Gets unlucky. Goes broke (aka "a capital raising may be necessary").
Those with some sense of history will recall the geniuses at Abbey National, who back in the 1990s came up with a strategy of Jamie Gold-like brilliance. This roughly consisted of "Buy distressed stuff (debt, stocks, bonds, whatever) 'cos, like, well, it was a tenner, and now it's only a quid. So, like it has to be value, doesn't it?"
At which point our resident sage M Woodhouse esq pointed out "yes, your maximum loss here is restricted to all of your money".
Step forward the current mug of the month, the Watford of proprietary trading, one Banca Italease. On Friday it casually confirmed that it would be writing off a loss of more than 600m euros of derivative trades, accepting that "enough is enough". That's a nice big profit for someone on the other side, and you can bet that "the other side" is one of the big American players. Still trying to salvage something from the wrreckage, the Italian bank has retained more than 100m euros in losses in ongoing contracts, hoping for some kind of get-out.
Just how quickly these things can go very wrong indeed is exemplified by the fact that, only on May 22, Banca Italease said that its exposure was 400m euros. So, that's a couple of hundred million in 25 or so working days. Ouch.
You wouldn't have liked to have been the chief risk officer or the CFO getting up each morning, would you?
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On the walk to work this morning the signs of the implications of the smoking ban in "enclosed public spaces" were plain to see. The outside of the old Mezzo, now Floridita, had a dozen or so bottle of beer scattered about, and many more cigarette butts.
It seems odd that a law should be brought in taking smoking away from a place that I can (and do avoid) - viz the inside of Floridita - and transferring it to a place that I can't (viz, the pavement outside).
And how can you call a pub (or a restaurant) an "enclosed public space"? I mean, try taking a half-bottle of brandy into a pub and sitting down for a drink, or taking your sarnies to Claridges and sitting down for a snack-up, and see where it gets you.
I was fine with people smoking in pubs. I can choose to go there or not. If you are bar staff, just don't work there if you are a non-smoker. To say that bar staff "don't have a choice" is gibberish. Of course they have a choice. It would be different if they chose to work in an environment that was non-smoking, stayed in that job for a decade, and then for smoking to be allowed.
Howevcer, just as bombers move to soft targets when the hard targets are protected (question to American Embassy, Downing Street and Parliament, what makes you special that you should be protected when young people enjoying themselves for the evening at a nightclub are vulnerable? If you did not have those barriers, the bombers would be going after you. Because you have the barriers, they go for soft targets) so the laws regarding smoking will soon shift to the outside as well. Westminster City Council will be the first to push for a ban on smoking on its streets, because the number of cigarettes on pavements is growing apace.
++++++++
Speaking of the "bombing paradox", Gordon Woo at RMS, a guy with a brain the size of a planet, put out an interesting analysis of terrorist strategy that could have come straight from the pen of Chen and Ankeman.
This is the logical analysis. But what are the thought processes of people putting up the huge barriers outside more "vulnerable" public buildings? Is it:
a) We don't give a shit if the bombers hit elsewhere. We'll be okay.
or is it
b) You see, what will happen is, the terrorists will come along with a plan to bomb the Houses of Parliament. They will arrive at the Houses, and this is the conversation that will ensue:
"Crikey, Osama Jr, there's a lot of security here. This will be a hard place to bomb."
"I think you're right, Bekhahmed. Perhaps we'd better give this whole bombing idea up, eh"
"Yes. I agree".
I don't think so.
And yet, that's the kind of hidden implication of increasing security in certain places (such as the City's "Ring of Steel"). An assumption that the putative bombers will look at the security and give it all up as a bad job. Of course they won't.
_________________________
You can see how it goes. Secondary bank sees primary bank making a lot of money from proprietary trading. Secondary bank thinks "this must be easy". Sets up its own proprietary trading desk. Gets lucky for a while. Thinks it's good at this game. Increases exposure. Gets unlucky. Goes broke (aka "a capital raising may be necessary").
Those with some sense of history will recall the geniuses at Abbey National, who back in the 1990s came up with a strategy of Jamie Gold-like brilliance. This roughly consisted of "Buy distressed stuff (debt, stocks, bonds, whatever) 'cos, like, well, it was a tenner, and now it's only a quid. So, like it has to be value, doesn't it?"
At which point our resident sage M Woodhouse esq pointed out "yes, your maximum loss here is restricted to all of your money".
Step forward the current mug of the month, the Watford of proprietary trading, one Banca Italease. On Friday it casually confirmed that it would be writing off a loss of more than 600m euros of derivative trades, accepting that "enough is enough". That's a nice big profit for someone on the other side, and you can bet that "the other side" is one of the big American players. Still trying to salvage something from the wrreckage, the Italian bank has retained more than 100m euros in losses in ongoing contracts, hoping for some kind of get-out.
Just how quickly these things can go very wrong indeed is exemplified by the fact that, only on May 22, Banca Italease said that its exposure was 400m euros. So, that's a couple of hundred million in 25 or so working days. Ouch.
You wouldn't have liked to have been the chief risk officer or the CFO getting up each morning, would you?
+++++++++++
On the walk to work this morning the signs of the implications of the smoking ban in "enclosed public spaces" were plain to see. The outside of the old Mezzo, now Floridita, had a dozen or so bottle of beer scattered about, and many more cigarette butts.
It seems odd that a law should be brought in taking smoking away from a place that I can (and do avoid) - viz the inside of Floridita - and transferring it to a place that I can't (viz, the pavement outside).
And how can you call a pub (or a restaurant) an "enclosed public space"? I mean, try taking a half-bottle of brandy into a pub and sitting down for a drink, or taking your sarnies to Claridges and sitting down for a snack-up, and see where it gets you.
I was fine with people smoking in pubs. I can choose to go there or not. If you are bar staff, just don't work there if you are a non-smoker. To say that bar staff "don't have a choice" is gibberish. Of course they have a choice. It would be different if they chose to work in an environment that was non-smoking, stayed in that job for a decade, and then for smoking to be allowed.
Howevcer, just as bombers move to soft targets when the hard targets are protected (question to American Embassy, Downing Street and Parliament, what makes you special that you should be protected when young people enjoying themselves for the evening at a nightclub are vulnerable? If you did not have those barriers, the bombers would be going after you. Because you have the barriers, they go for soft targets) so the laws regarding smoking will soon shift to the outside as well. Westminster City Council will be the first to push for a ban on smoking on its streets, because the number of cigarettes on pavements is growing apace.
++++++++
Speaking of the "bombing paradox", Gordon Woo at RMS, a guy with a brain the size of a planet, put out an interesting analysis of terrorist strategy that could have come straight from the pen of Chen and Ankeman.
The attack was directed at a London nightclub, a soft attractive target, without barrier protection against car bombs. This is consistent with the principle that terrorists follow the path of least resistance in directing attacks at attractive targets with security weaknesses.
An explanation is that the number of operatives involved was relatively small. Too many terrorists spoil the plot. The more operatives there are in a plot, perhaps with multiple attack targets, the greater the chance that the plot will fail due to information leakage.
There is an optimal stopping point in attack planning. Beyond this point, the risk of the plot being discovered outweighs the marginal benefit of enlarging the plot. With increased resources allocated to the UK security services, the optimal stopping point may be getting earlier, with the consequence that there may be a spate of moderate scale attacks, such as attempted today.
This is the logical analysis. But what are the thought processes of people putting up the huge barriers outside more "vulnerable" public buildings? Is it:
a) We don't give a shit if the bombers hit elsewhere. We'll be okay.
or is it
b) You see, what will happen is, the terrorists will come along with a plan to bomb the Houses of Parliament. They will arrive at the Houses, and this is the conversation that will ensue:
"Crikey, Osama Jr, there's a lot of security here. This will be a hard place to bomb."
"I think you're right, Bekhahmed. Perhaps we'd better give this whole bombing idea up, eh"
"Yes. I agree".
I don't think so.
And yet, that's the kind of hidden implication of increasing security in certain places (such as the City's "Ring of Steel"). An assumption that the putative bombers will look at the security and give it all up as a bad job. Of course they won't.
_________________________
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no subject
Date: 2007-07-02 12:49 pm (UTC)I assumed that politicians and the like put up barriers around themselves because they can.
I note from the radio news this morning that many (all?) airports were stopping cars from approaching airport buildings. Genius. Like Johnny Terrorist couldn't put his bomb in a large wheelie suitcase and drag the thing inside. Or do the "security services" think it'd be too much bother? I despair.
I'm wondering how long it will be before we are all required, under threat of imprisonment (space permitting), to provide a DNA sample for the national database. Less than 10 years, I'd guess.
First of all ...
Date: 2007-07-04 05:13 pm (UTC)DNA samples, iris scans, ID cards, and all the rest should (God willing) be banished into a dustbin. I'm certainly not going to put up with it. I'd like to think that any normal person would object as well -- but then, yer all ferkin Londoners, aint'cha?
By the way, Mike, I think you misunderstand the whole idea of "bonuses." A bonus is a completely arbitrary sharing of profits, directed in an completely arbitrary way, to people who may or may not have had some influence on those profits.
You, on the other hand, seem to be annoyed about missing out on a freebie. That is an entirely different thing. In order to be entitled to be given a freebie, you would have to be (a) a Freemason, (b) a completely pointless officer of the company (think HR) or (c) a non-executive director.
Since I, for no reason at all, assume that you are none of the preceding things, I therefore logically deduce that you are not worthy of a freebie.
Isn't Milton Keynes a lovely place, and ideal to work in, incidentally?
Re: First of all ...
Date: 2007-07-04 07:42 pm (UTC)I understand the arbitrary nature (arbitrariality? arbitrariness?) of bonuses, Lord knows I've been both beneficiary and victim over the years; it was nice to be out of the equation when contracting: a state of grace in which I am not currently to be found. I'm mildly curious about the "incentivization" bonus as concept - we didn't make money this year but think you might be relevant in changing that, so here's something to make you think well of us and not leave - on balance, since I got just such a bonus this February, I think I have to declare myself in favour.
I'm annoyed that my translation of GeheimstatsPolizei into Homeland Police, a short hop to "Homeland Security", turned out to be erroneous once I actually checked. Ironically, of course, I have never been more law-abiding, but I also feel more threatened by "security" measures than ever. Presumably because I have a better idea now of what we would be losing forever.
Re: First of all ...
Date: 2007-07-04 08:21 pm (UTC)Kiss your boss for me, by the way. Couldn't hoit ...
What we would be losing forever, or at least until death do us part, or maybe until some random butterfly in government flaps its wings, is Being British. Bugger me, I'm not a big fan of 1688. I can't say we did much better in 1783, either, and 1919 to 1922 was a bit of a shambles, all in all. We all need to learn the lessons of history, and the lesson I've learned over the last twenty years is, get out of the fucking place.
Unfortunately, I'm stuck in this hideous dump. As such, I refuse to put up with it needlessly throwing away what little passes for its heritage, ie freedom from interference by the state. (Which is, amusingly enough, an inheritance from Walpole, who was almost certainly the most corrupt Prime Minister to tread the boards. And we've had a few.)
Bollocks to bombers, bollocks to al Quaeda, and bollocks to idiots who believe that $18 billion on an updated version of Trident, plus a hi-tech passport a la Belgium, will keep us all safe in our cars whilst travelling to Glasgow Airport.
By the way, take the second roundabout left, then go through three more, turn right, look for the palm trees, show the appropriate id, flash your baby blues, and ask for "Mr Big." Let me tell you, that's the real way to have a good time in "Keynes," as we in the know call it.
Selah.
Re: First of all ...
Date: 2007-07-06 07:31 pm (UTC)Or at least would buy into the fifteenth round, the nineteenth hole, the sixth set, or the sixth shot in an England-Germany penalty shootout, just to watch Barbra Streisand on a "retirement" tour at the MK Multiplexodome-A-Go-Go.
I suppose I, too, could check GeheimstatsPolizei, but, as I'm sure my old German teacher at Oxford (only half of her relatives ended up on the intimate end of a piano wire. G-sharp, I think it was. Or maybe I'm thinking of a vicious metallic violin wire, mis-tuned by half a tone?) would put it, "This is an awfully worrying usage of language, Peter. It has been known to happen before. And don't you forget it."
Then she would chase me around her immaculate North Oxford garden in her wheelchair, merrily thrashing me with an out-of tune violin wire as she giggled, giggled, giggled. I think the drugs may have worn off.
It all seemed innocent fun at the time, as I explained to my dermatologist.
Just don't forget. These things matter. Incidentally, your last paragraph seems to indicate that you've got your thoughts in the right order, but haven't quite admitted to yourself what that order is.
(Don't worry. For you, ze war is over. But the flattened G-string ... ve haff vays of making you sing ...)
------
Her name was Mrs Burckhardt, by the way. And the rest of it is true. Apart from the wheelchair and the thrashing bits, obviously. If a member of an upper-middle-class Rhenish family is prepared to teach an idiot like me German, and even specify Nazi texts just to drive home the point that "this is a travesty of the language" -- which it is -- after all that, then I believe I owe it to her to make sure none of this nonsense happens on my watch. I realise this is an inversion of the usual "all arguments, if they last long enough, terminate when one person mentions Hitler," but this is different. It's induction, not deduction. I am not even going to participate in a process that starts with Weimar Germany, let alone quibble about the fuckin destination.
Re: First of all ...
Date: 2007-07-06 08:25 pm (UTC)Re: First of all ...
Date: 2007-07-06 09:53 pm (UTC)Not the Sicherheits-Schutzstaffel at all then. (Bad guess as to the bit of the SS that wasn't Waffen, but good enough for me.) I guess Heimstadt doesn't really come into it, after all. And there's absolutely no reason to worry about the very idea of a "Tsar" (pardon my Cyrillic) of "Homeland Security" at all, is there?
Not the faintest smidgeon of "Fatherland" hitting you there? Or, just to pick another fascist monstrosity of the Twentieth Century, "Motherland?"
As my old and revered German tutor would say, "Keep sharpening that piano wire."
Except that she wouldn't.