20 Sep 2017

McKinsey's Spur der Verwüstung - Inside Paradeplatz

Maybe a bit exaggerated, but there is an element of truth in it. The fees charged by Management Consultants - esp. the largest ones - are out of line with the benefits they often bring. Fees are paid independent of ultimate results, if they are below par there is no chance to get reimbursed. And quite often the gruntwork is done by very junior staffers that never had any real business experience. But the fees that are charged for them do not reflect this. So why not use someone with frontline experience gained over many decades, over many market cycles and in many company cultures?

McKinsey's Spur der Verwüstung - Inside Paradeplatz

13 Sep 2017

MUFG said to pick Amsterdam for Securities Base after Brexit

The Securities Diaspora gathers pace. There is only the little problem of human 'resources' to consider. While Japanese and Expats from other countries (less so) can be shifted quite easily - how about the workforce that has its roots in London? And how easy will it be to find willing recruits in London, Paris or other centres that will consider job offers in a smaller regional centre - however brilliant some aspects or life might be there? And managing dispersed teams all over Europe will be a major challenge for management!

30% of Bank Jobs May Disappear in Next Five Years - Former Citi CEO

Vikram Pandit, who ran Citigroup Inc. during the financial crisis, said developments in technology could see some 30 percent of banking jobs disappearing in the next five years.

8 Sep 2017

Investment Management: No limits to Size?

Talk of (inevitable?) concentration in the Investment Management universe must lead to the obvious question: is it really inevitable as many consultants and industry bigwigs are saying or is there a natural limit to ever-expanding amount of aum among the industry giants such as Vanguard, Blackrock or JP Morgan?
There may well be the result of at best matching the investment benchmarks (minus fees, costs) as the sheer size of portfolios makes any meaningful divergence from the benchmark more and more impractical. So even active management will be not much different from passive management the bigger a provider becomes.
Product differentiation may provide a (temporary)?) solution as the myriad of strategies can again try to be nimble small fish in a big pond. So effectively big investment houses become a congregation of investment boutiques under the same roof - be they separate subsidiaries (as at Natixis for example) or just different teams under the same umbrella.
Which leads to the next conclusion: if boutiques are the way to at least try to make active investment management work who is to say that free-standing boutiques or even mid-sized firms are necessarily at a disadvantage? Everybody knows where the big pools or money are and digital distribution channels will keep the costs garnering assets under control.
Largest US pension fund CalPERS in talks with BlackRock to outsource buyout business, source says

Top Execs sell stock before bad company news breaks

When well-paid (overpaid?) top executives behave like this one should not wonder that Capitalism and the Market System increasingly lose public support. It is only fortunate that the average citizen is not really able to properly put such blatant abuse of position into proper perspective. After all, how many do really understand what a million dollars (life changing amount for 99% of the population) means? The maths scores tell a story! And it will be interesting to see how regulators and the trustees of the savings of ordinary people (aka investment managers, private bankers) and the corporate and 'socially responsible' investment crowd are going to do about this.

7 Sep 2017

Diamonds are Forever?

Lending ONE BILLION against some baubles supposed to be in envelopes or safes? NUTS! Did they never hear about the Great Salad Oil Swindle in the early 1960's? What do these risk managers do? Do the 'Elite' Business Schools teach them the basics?

30 Aug 2017

Russia To Ban Cryptocurrency Sales To "Ordinary People"

Rightly so, time our often over-reaching regulators wake up to this charade, and please don't call these 'Coins' a 'Currency', they are neither coins nor currencies but should be relegated to the game universe.
Russia Backpedals On Bitcoin - Unveils Plan To Ban Cryptocurrency Sales To "Ordinary People"

29 Aug 2017

London Job Losses - trickling rather than bleeding

One always had to wonder why Deutsche Bank needs 9000 people in London, or HSBC needs 43000 in the UK. Was that not always padded by quite a bit or over staffing? So large banks move dozens or even hundreds of jobs, dispersed in various regional centres? Given the arrival of Fintech and the plummeting cost of communicating with low-cost centres there was always the prospect of job diversion, especially in support roles. Globalization also means that other centres such as Dubai, Singapore, Shanghai etc would grow in stature and staff would be relocated closer to customers and markets.
In the opposite direction there are forces that might in the long run strengthen the role as hub and nerve centre coordinating and directing the regional centres. Higher Value-added roles might well be concentrated in the UK - if politics and regulation are creating a business-friendly environment.

22 Aug 2017

Bitcoin Hype - Regulators asleep or afraid

Given the thousands of pages of detailed regulation that has been produced in all major industrial countries one has to wonder why the Regulators are keeping stumm about the Bitcoin craze. Claims that thses 'coins' are Digital 'Currencies' are clearly misleading (try selling a 'Digital House', or a 'Digital' Brooklyn Bridge). Neither are they a safe haven, they are digital assets and given the way they are offered and promoted they are investments and as such should be brought under regulatory umbrellas.
The price of Bitcoin and Ethereum is slipping but Bitcoin Cash is rising

15 Aug 2017

Bitcoin hype - stop calling it a 'Currency'

Tulips, Tulips anyone, or maybe you want to buy a Bridge? Play the hype but please stop calling Bitcoin a currency. All sorts of stuff served as currency at one time (shells, salt for example) but currency is what is generally accepted in payments at the time. So Gold is no longer a currency, neither are shells or salt.
Bitcoin hits another record high, value has risen over $15 billion in one week alone

25 Jul 2017

Goldman Sachs is scaling back market-making for exchange-traded funds

This will not make it easier to maintain orderly markets if and when the tide turns and markets enter a bear market. Markets move faster on the downside and panic is never far away then, even more so now that global markets are linked by ultra-fast communication and the crowd/herd effect can accerate trends.
Goldman Sachs is scaling back its role as a lead market maker for exchange-traded funds

Goldman Sachs is scaling back trading exchange-traded funds

This will not make it easier to maintain orderly markets if and when the tide turns and markets enter a bear market. Markets move faster on the downside and panic is never far away then, even more so now that global markets are linked by ultra-fast communication and the crowd/herd effect is easily generated.

Goldman Sachs is scaling back its role as a lead market maker for exchange-traded funds

13 Jul 2017

Impressions from Paris - Europlace Conference

This year more than in other years this annual event was to be interesting given the fact that Brexit is in full swing (or not if you listen to Remainers and assorted moaners). So the lack of a strong attendance by non-French visitors was a surprise. Naturally the locals did their best to put Paris in a good light. Not so sure about the 'City of Love' as some panelists did not forget to mention. But then why has prostitution then be made illegal in 2016? Cannot be so good for love!
On a more serious note one has to accept that Paris was a large financial centre before Brexit. How much it will be able to add now is not so clear. Most market professionals may speak English so incoming staff may be able to fit in, but their private lives may not be so easy. Nice property is as expensive as in London, and finding a house with garden will be a struggle. And giving preferential tax treatment to financial staff - and only the heavy hitters among the foreigners - may not go all too well with 'Fraternite' as it is a blatantly discriminatory law (do the EU and the ECJ dare to intervene?)
Dublin, Frankfurt are already busy nibbling on London's cake and only time will tell how much they can grab. Will financial firms be more efficient if they spread themselves thin all over Europe? Communication is cheap, but lack of face-to-face interaction will do little to improve either the work climate or coordination.

7 Jul 2017

EU Regulators Take Aim At London's Asset-Management Industry

No surprise there, EU is basically a protectionist racket, dominated by socialist parties and lobbies, where even pseudo right wing parties are praying from the same hymn sheet and embrace big government. Also means that the UK has to negotiate harder, I suggested a while ago that if local production would be required for asset management services then the same rule should be applied to manufactured goods. So come on BMW, Daimler, start producing in the UK. And someone has to tell the Eurocracy: keep your MIFID and Financial Transaction Tax nonsense!
EU Regulators Take Aim At London's Asset-Management Industry

27 Jun 2017

Soothing Words about ETF - But Liquidity disappears when we need it most

The market does provide super liquidity that one could never imagine in the past. But when the music stops there will NOT be enough chairs! This type of complacency makes a major debacle even more likely. How many (highly paid) risk managers are really prepared for nearly instantaneous price changes of 20-25 % in all major markets? Tiny slivers of margin will just not be enough to cushion the blow, esp when some potholes open up and a player (or players) fail.
Junk Bond ETFs Are the Future. That's a Good Thing. - Bloomberg

14 Jun 2017

NYC proposes to prohibit asking candidates about current salary

Not clear why Messrs. Schwarzman (Blackstone) and Corbat (Citigroup) would have any objection. All prospective employers need to know is what salary a job candidate expects.

13 Jun 2017

Money laundering laws - waste of money and attack on privacy

Anti Money Laundering laws - nearly as useless as the attack on alcohol during the 1920s in the USA. And instigated from the same legislative mob!
Money laundering laws also harm the innocent - Washington Times

12 Jun 2017

Outsourcing without limits?

Should national and supranational regulation allow the unconstrained outsourcing of vital enterprise functions? Information Technology is no longer a low skill 'back-office' job but a vital ingredient of today's business. And this applies more than ever to the finance industry where security is more important than in most other lines of business.
Job-Spirale nach unten: First London, dann Zürich - Inside Paradeplatz

11 Jun 2017

Credit Ratings - still no reform

While regulators have produced tons of paper simple and effective reform of Credit Rating Agencies has not happened.

1 Jun 2017

Is big better in Money Management Biz?

Bigger does not necessarily mean better. Big fund managers did something right otherwise they would not be big. But that could also be their undoing. Once you manage billions you are going to find it very difficult to achieve any out performance. That will mean that smaller firms will find room to grow.
Big money managers are squeezing smaller ones at worst possible time - Business Insider

EU wants a ban on UK firms setting up Brexit shell companies

So what is supposed to be a 'Shell Company'? Are the Eurocrats going to prescribe the exact number of jobs that have to be hired by a subsidiary? As I repeatedly said - starting in Feb 2016 - one has to look at the different business lines in detail. M+A businesses are quite often already on the ground in the 'Rest EU'. One office should be enough, same can be said for most other finance businesses.
EU wants a ban on UK firms setting up Brexit shell companies

20 May 2017

19 May 2017

Slap on the Wrist for Omega's Cooperman

Can one call a $5 million fine significant given that Cooperman is a certified billionaire? Slap on the wrist would be more appropriate. And if no guilt is admitted why pay a fine? Looks like there is a two level justice system and incidents like these will do nothing to restore public confidence in financial regulation or the banking and investment industries.
Leon Cooperman’s Hedge Fund Settles Insider Trading Case

17 May 2017

Vanguard's new UK Online Offering

Afraid this is the way things will go - I  remember the time (more than 45 years ago) when Robeco's international flagship fund charged 0.36%. So maybe that is where the Mutual/Investment Fund Industry is headed to. Who still remembers Bernie Cornfeld's ill-fated IOS? Those were the baby years of investing funds...and the sums have become enormous since the late 1960s. But looking at the way Fiduciaries like Aberdeen Asset Management and Standard Life spread the investor's money around like confetti it does not give the impression that the Industry is ready to face the new reality.
Vanguard launches online investment service in UK

15 May 2017

EU: Free Trade only when Eurocrats like it?

Talk about EU being a bastion of Free Markets is Rubbish! Services - the growing part of advanced economies - are carefully excluded where it suits the Eurocracy. So banning Euro Clearing from being handled in the City of London is a blatant slap in the face of Free Trade. Let's call a spade a spade and not pussyfoot around with these hypocritical ideologues - be they called Merkel, Macron or Juncker!
The City of London After Brexit Isn't Just About Jobs - Bloomberg

11 May 2017

Johnny Depp made $650 million but couldn't pay for his lavish lifestyle

Just another reason for inequality is demonstrated by this: Copyright protection for Movies and Actors? Is it really necessary for the benefit of mankind? not the same as inventing a new medicine, and in the old days even the people behind life-saving medicines did not do it for the money anyway.

Johnny Depp made $650 million but couldn't pay for his lavish lifestyle, ex-manager says

10 May 2017

Regulation: Race to the bottom?

If rules are interpreted so 'flexibly' in the USA it will be interesting to see how 'Europe' reacts (if the sleepy bureaucrats there even notice or care). Apart from the problem that Brexit will soon loom over any regulation in 'Europe', the response could be either to loosen rules/interpretations as well or demand that US entities comply with stricter rules designed in Europe. And what if the UK goes for a laxer regulatory environment? Every bloc will try to help his financial firms or bloc those from the other blocs, interesting times indeed!
Who’s Watching Wall Street? The Feds Turn a Blind Eye to Goldman’s Game | The Fiscal Times

6 May 2017

Swiss National Bank the "Greater Fool?

Amazing focus on biggest Momentum stocks shows lack of imagination in this bastion of Conformity.
"Mystery" Central Bank Buyer Revealed, Goes On Q1 Buying Spree | Zero Hedge

4 May 2017

Risk Parity: Just another name for Portfolio Insurance?

Risk Parity - like Smart Beta or Factor Investing - is old wine in new bottles. A Bull market always needs a rationale to justify the irrational, Greed has overcome Fear. In reality all is backed by a tide of easy money.
Pondering The Real Perils Of Risk Parity Portfolios | Zero Hedge

1 May 2017

Compliance hiring at fever-pitch!

My (pessimistic) prognosis of  'One Compliance Kommissar behind every productive Staffer' is soon (already?) sad reality. Wish the same could be said about politicians and civil servants! Did Ancient Rome not die after suffocationg on legal and bureaucratic overkill?
Deutsche Bank hiring in compliance - Business Insider

27 Apr 2017

Deutsche Bank: Bye Bye London? but not because of Brexit

The track record of the bank is nothing to write home about. The huge build-up in London, from an insignificant commercial branch in the mid 1980s - has probably cost more than it ever earned the bank. So move back 'home' may be sensible, but not because of Brexit!
DEUTSCHE BANK EXEC: We may need to move 4,000 UK staff to Europe because of Brexit

26 Apr 2017

EU markets rules are the 'worst piece of legislation'

No surprise! Anyone who ever had to read through the garbage produced by the FSA, FCA, Bafin etc would heartily agree. At least Brexit will cut out the ECB and EU scribblers!
The boss of one of the world's biggest exchange groups said EU markets rules are the 'worst piece of legislation' he's ever seen

20 Apr 2017

SURVEY: 82% think more firms will set up in Europe because of Brexit

Nothing to worry about, if anything positive for UK as its firms will have to set their eyes on export markets in a more pro-active manner. Free of the cost of EU membership (mostly socialist redistribution to the unworthy) and regulation Britain should do well. Being ruled by one government rather than a committee of 27 should speed up decision making.
SURVEY: 82% of investors think more firms will set up in Europe because of Brexit

13 Apr 2017

Compensation: Excessive focus on individual performance dangerous

Compensation based on share price development? This is contrary to all sensible pay schemes and one of the main contributing factors to excessive executive pay. Maybe this works in the confines of a small investment boutique but even there it is not clear what the scheme could do to improve the performance produced for investment clients.
Excessive focus on individual performance is inherently dangerous, says Barry Olliff | City A.M.

12 Apr 2017

ABarclays exec breaks silence over LIBOR-rigging

Anyone who has worked in a front-line trading/sales position will know that nothing is more tedious than giving out regular valuations to customers, esp if the relevant security trades infrequently. Apart from the tedium it is not clear why a trader should not give a LIBOR quote that reflects his position. He/She is no god, or impartial regulator, any quote reflects a view. A lot noise about nothing! Just to keep the jobsworth in government, media in clover!
A Barclays exec who went to prison for LIBOR-rigging breaks his silence: 'Traders have been served up as fall guys to protect these more powerful senior bankers'

10 Apr 2017

UBS CEO: Switzerland is more important to America than China

Really? Most Americans would have trouble finding Switzerland on a Map! (maybe China as well)

UBS CEO: Switzerland is more important to America than China

France’s MinFin: London to lose Euro Clearing

Well, would not call this unelected bureaucrat 'prominent'. Arrogant would come to mind instead, but what is new? It is a tight clique that has France in it's grip, and the upcoming election will confirm the status quo. But as the Eurodollar market has demonstrated, the clearing cannot be controlled by administrative Diktat, even it the fawning Scribblerati don't have the guts or brains to point this out!
France’s finance minister Michel Sapin: London to lost euro clearing business - Business Insider

8 Apr 2017

BOE's Carney urges banks to prepare for all potential outcomes

OK, so what about WW3, Meteor impact? All these events COULD happen, more work for the jobsworths in the ever-expanding  regulatory realm.
Brexit: Mark Carney urges banks to prepare for all potential outcomes

29 Mar 2017

Apocalyptic forecasts for UK Finance miss key points

I am tired to repeat the same old arguments (first published back in Feb 2016!) that Brexit is not the Armageddon that some predict. While some firms will boost their presence on the Continent London will benefit by being more open to the 'rest' of the World. Being in sole charge of policy the UK will be much more nimble than the multi-headed EU bureaucracy that has to satisfy 27 squabbling member states. And spreading staff all over Europe will do nothing for the efficiency of the (mostly) larger financial firms that de-emphasise London. Why triggering Brexit signals a long, slow bleed for the UK banking sector

28 Mar 2017

ECB's Sabine Lautenschlager on Brexit banking passport tests

Refreshing honesty from a perfect representative of the 'Deep State', German version. Fortunately the major banks - they are the ones who do the predominant share of Continental European business - are well established in relevant countries. So this is more empty posturing by a life-long bureaucrat that has to sing to the statist hymn sheet.
ECB's Sabine Lautenschlager on Brexit banking passport tests - Business Insider

Brexit will bring four types of market distress

There will be some adjustment period and it could be turbulent. Problem with Brexit is that the final terms are not known so planning for the time after is tricky. Reason to get on with it - not hang around until 27 countries, the Eurocrats and the EU Parliament make up their mind.
Brexit will bring four types of market distress: Portfolio manager

24 Mar 2017

Deutsche Bank is planning a new London HQ despite Brexit

No surprise to our readers! Having too many major hubs is a recipe for inefficiency! There is only one Hollywood as well!
Deutsche Bank is planning a new London HQ despite Brexit

21 Mar 2017

Frankfurt is in 'pole position' in the Brexit jobs race

Been there dozens of times for business, nice people, but if anyone believes it will take over as THE major financial center I have a bridge to sell....
Frankfurt is in 'pole position' in the Brexit jobs race

20 Mar 2017

Texas Teachers - new Fee Model for Hedge Funds

Will 1+30 become the new standard? Relating the higher performance fee to some kind of hurdle rate is the problem. Which rate is suitable? And if is is some money market rate this is particularly problematic. At present rates are so low that beating them would not be that onerous. And if rates are high, 6, 7 or 8 pct, then the hurdle is difficult to overcome.

Outlook for Actice Asset Management no so bright

Morgan Stanley on active managers - Business Insider

18 Mar 2017

AllianceBernstein tries Performance Fees

The basic fee of 0.05% in case the funds underperform are quite meagre, will this approach be sustainable? The fee income has to pay for a lot of expenses. The comp for CEO Peter Kraus alone ($6.35 Mio according to Yahoo) would need a fund volume of 12.7 Billion (!!) to pay for, and that leaves NOTHING for any other costs!
AllianceBernstein Fires the Latest Shot in the Fee Wars (Barron's, PayWall)

16 Mar 2017

The Dystopian Future of Price Discrimination

Time for our Solons to stamp out any incipient abuses. Start with Google - ban collecting search history, ban selling slots on search results, then Amazon - break up the business, own sales and agency sales, Apple - divest from content sales

The Dystopian Future of Price Discrimination - Bloomberg View

Disclosing your Salary to prospective Employer?

This is why you shouldn’t lie to a future employer about your salary

London’s single market access will end with Brexit

No need to run scared, as I have stated earlier, an analysis of all business lines shows that the EU umbrella is not really that important. Major firms are already present in key locations on the Continent. In the long run a dynamic London financial centre serving the world without cumbersome regulations will win over Paris and Frankfort any time! And what about 'giving access' to London to banks/asset managers in the (doomed?) Eurozone?
London’s single market access will end with Brexit

15 Mar 2017

Untested Robo-Advisers Are Becoming a Big Market Risk - Bloomberg View

Assets under Management by Robo-Advisers are not yet that large. But when they are in the hundred of billions it will create the mother of all panics. The programs behind them - in addition to 'sophisticated' quant funds - will all rush to the exit at the same time! Sprinkle a few billions of ETF into the mix and the fun can start! No amount or margin/collateral will be able to cope with the resulting price changes. As I often said in this blog - near instantaneous price moves of 20-25% have to be expected. Remember October 1987! It DID happen, and that was at a time when overall volumes and assets where quite a bit smaller.
Untested Robo-Advisers Are Becoming a Big Market Risk - Bloomberg View

No one voted for Exchange of Tax Information

Quite apart from the fact that there are simpler ways to increase tax revenues the international agreement violates basic rules of a proper democracy. The agreement is negotiated several steps removed from what ordinary citizens care about, or what they want. Anonymous bureaucrats deal over the head of citizens in backroom fashion. A withholding tax would have been simple to introduce and administer and the privacy of savers would have been preserved.
The hypocrisy surrounding this form of legislation is evident when just recently the Italian government announced that the Super rich would be offered tax-haven status in Italy. A billionaire would be able to pay just €100.000 (!!) per year in full settlement of his tax obligations! And an (in)famous Italian, Signore Draghi does his best to confiscate the incomes of hundreds of millions of hard-working and honest citizens in order to bail out his profligate fellow-citizens.

Merger Poker - EFG, BTG Pactual and BSI Lugano

There is lots of talk about the need to get bigger in the Financial Services Industry. But there are plenty of potholes on the route to 'Bigger and Better'. Apart from accounting and valuation issues the question of contrasting management cultures can also pose significant integration risks. Do not write off smaller competitors or even nimble mid-sized Asset Managers or Private Banks.
Joe Strähle verrechnete sich mal kurz um 41% - Inside Paradeplatz

13 Mar 2017

How can I make performance reviews less painful for all concerned?

There was a time when people knew each other and box-ticking exercises were not necessary, O tempora o mores! Managing relationships with colleagues and staff should be a year-round task but all-too-often problems are allowed to fester - and the ritual of an annual review will not be enough to defuse the situation, if anything it just creates more tension.
How can I make performance reviews less painful for all concerned?

9 Mar 2017

Management Consultants - overcharging for Juniors?

Why would any sane Management engage Consultancy firms that charge them exorbitant hourly/daily rates but have the work done by juniors that have no relevant front-line experience in the industry? A fresh pair of eyes? Top Management often neglects the experience of those already working in the firm. Hierarchical thinking prevents feed-back from those that often see problems and how to resolve them at first hand. And what is the trackrecord of firms such as McKinsey? But of course, no one ever got fired for hiring IBM. But that it is in many cases an ex-staffer hiring his old firm - should that not cause alarm bells ringing? Was there a proper beauty parade before a firm is hired? And was there an inquiry that proved it was absolutely unavoidable?

McKinsey jetzt auch bei der Saxo Bank