Tag Archives: Standard & Poor

January 16, 2016 · 20:04

Twilight in your pants

This is not about medication, or even about flaccidness (other than the flaccidness of the economy or politicians for that matter). No this is about changes, about the need for governments to do a lot more than wake up, because that knock on your door is no one else but the grim reaper informing you that time is up, with the additional request to follow him into the next room.

Yes, this sounds like drama and entertainment, but it is not. At present, the changes that will hit us can impact our retirement funds, they will hit our lifestyle and it will most definitely hit the cost of our living. All elements of a situation I send warning about. So now we read ‘US stock markets take a major fall as Dow reaches lowest level since August‘, where (at http://www.theguardian.com/business/2016/jan/15/us-stock-markets-fall-dow-oil-prices-china), the quote “the Standard & Poor’s 500, the index of America’s biggest companies, falling 2.2%” might give view that there is not a large event going on, but that is alas not the case. The two quotes “the markets’ decline has put “a negativity across the economy, a negativity to every CEO looking at his or her stock price, a negativity about business”. He also warned that the oil price, which on Friday settled below $30 for the first time in 12 years, could fall as far as $25 a barrel or lower” as well as “We’ll probably have to test the markets lower, and I think when we test the markets lower it’s going to be a pretty good buying opportunity”. These two give view that waves are coming, but when we look at the reality of any market and any season, there will be indications that sometimes those markets are up and sometimes they are down. So why exactly is this a big issue?

Well, that part is seen in “The falling oil price and disappointing retail sales data released on Friday have pushed back expectations of when the Federal Reserve will next increase interest rates“, yet the question is, was this all about the oil, or is this about the hidden text, the mere mention ‘disappointing retail sales data‘, which in a long down economy should not be a real surprise. The text “retail sales declined in December to make 2015 the worst year for US shops since 2009“, as well as “retail sales dropped 0.1% compared to November” was set in two separate paragraphs as to confuse the reader with a half sentence, but consider that November preceding the shopping needs for Christmas was 0.1% higher, this gives a clear part of the problem, because consider all those temp workers, with economy that bad, how can they hold on to their jobs? Their bosses cannot be blamed here. This is about an economy that had been ‘spiced’ up in reports and then failed to deliver. Something that we all should have seen coming.

The second story confirming all this namely ‘Wall Street plunges after poor US manufacturing and retail sales‘ (at http://www.theguardian.com/business/blog/live/2016/jan/15/oil-prices-slide-back-towards-30-heading-for-10-weekly-loss-business-live), gives more information. Now I’ll add the quote “On Wall Street, the Dow shed more than 400 points, a drop of 2.3%, and the Nasdaq is nearly 120 points off, a 2.7% decline. The FTSE 100 index is down 2.1%, France’s CAC is off 2.8% and Germany’s Dax has lost nearly 3%” but I’ll ignore it for the moment, you see when we see “We now estimate that real consumption growth was a disappointing 1.5% to 2% annualized in the fourth quarter, with overall GDP growth at an even weaker 1%“, which comes from Steve Murphy, US economist at Capital Economics. So, Mr Murphy, which part of a weak economy, people out of jobs, people forced to work two jobs to get above the poverty level, what did you expect them to do? Ignore their hardship, whilst they realise that bills are due a mere week after Christmas? Neil Saunders from retail consultants Conlumino adds to that conundrum by adding “A relatively weak product line up in electricals failed to capture consumer interest, resulting in a sales decline of around 3.5% in December; and although sales picked up the latter end of the month, clothing also put in a lackluster performance thanks to warmer than average weather“, so he is stating (considering the group mentioned earlier, a group that impacts well over 15% of the US population, in addition, the group that is somewhere between 25% and 30% is just getting by. That gives us close to 50% of the population, do you actually think that these people are interested in an Electrical product line? Did you not consider that well over 50% of the US population is not interested in a new 3D TV, but will find whatever cheap option available, in addition, if the current TV is working, they will try to skip it for a year. Did you not consider that? As for the fashion part, the fact that it was also US’s wettest December on record is ignored, so those people did not pay for things like coats, boots and so on? Umbrella’s perhaps?

So even though it is not the coldest one, it might not have stopped a collection of ladies to buy something for the Christmas occasion, they would still have needed clothes, perhaps your consideration is off?

You see, these people project and make conjectures based on flawed data sets, in addition, as they make the call for needs that might be, they are ignoring the needs that actually are. A functioning economy being the first part of it. In all this the UK is not outside of the scope either. This we see in the third article called ‘Bank of England bans two former Co-op Bank chiefs from top City jobs‘, the article (at http://www.theguardian.com/business/2016/jan/15/bank-of-england-bans-co-op-bank-barry-tootell-keith-alderson-top-city-jobs). These three articles were not randomly chosen. Let me add the following quotes “Two former bankers at the Co-operative Bank have been banned by the Bank of England from holding senior positions in the City after being found to have posed an unacceptable threat to the company’s financial position“, we also get “The Bank is fining Barry Tootell, a former Co-op Bank chief executive, £173,802, and Keith Alderson, who ran the corporate and business banking division, £88,890“. Which might leave us with the thought that a fine was given, so what is the hustle?

That we get from “Banks that are not well governed have the potential to pose a threat to UK financial stability. The actions of Mr Tootell and Mr Alderson posed an unacceptable threat to the safety and soundness of the Co-op Bank, which is why we have decided a prohibition is appropriate in these cases”, which sounds awesome and in that, similar steps should have been taken against many others for amounts many times higher than those mentioned. Yet, what is still the issue?

Well part of it is seen here “It cites moves by him to change bad debt charges, which in one instance which had the effect of maintaining the bonus pool“, which is an issue to one end, yet the other part “The Co-op Bank has already taken steps under previous rules to withdraw £5m of bonuses from a number of employees and there is no prospect of clawing back any more bonuses“, you see these things happen and as such there will be consequences. The final quote “The Bank of England did not find Tootell or Alderson deliberately or recklessly breached the rules and did not make findings of dishonesty or lack of integrity in issuing the bans and fines”, gives us the issues to work with. So as stated, the quote “the potential to pose a threat to UK financial stability” is now at hand, because even as those two had senior positions, they still reported to others, they reported to a board of members at the very least. The two might have been fined £261K, but how much in bonuses have they acquired?

That issue can be seen in the first part as stated earlier “did not find Tootell or Alderson deliberately or recklessly breached the rules and did not make findings of dishonesty or lack of integrity“, so if that is not the case, why would there be an issue? If there was no deliberate or reckless, than why are they held to account? There were no guilty parties? So those two are either patsies, or they have the goods on multiple others and they are ‘let off’ with a possible bonus option down the line. In all this we see a few issues. The first, as I see it is that pushing two people out is merely a hollow gesture. Which also connects to the US, as given in “to pose a threat to UK financial stability“. You see if that is true and these small fish are indeed a danger, why are the big fish not acted against? Someone hired these two and mentored (and hopefully monitored) these two. The fact that they are merely ‘senior’ also implies that there are a few involved members that they reported to, are they not bigger threats?

The article ends with “the current management team continues to progress the turnaround, having raised additional capital, achieved considerable de-risking and improved brand metrics“, so how much of a risk does Co-Op remain to be. More important, why is a market research metric an issue here? You see ‘improved brand metrics’ sounds nice, but how much does it matter in the scheme of things? We all accept that brand metrics matter, yet in this light, is this truly about ‘branding’? Perhaps this is about the issue of ‘de-risking’ which also impacts branding, but de-risking is all about the bank not becoming the next ocean floater. So are we misinformed? Yes, we are, but embossing was never really illegal (it is the existence of marketing).

In this, the press has little blame, it is what they are told and as such, in this case, I am not having a go at the Press. What is partially the issue is that these articles are at the foundation of things that have been known, issues that are set or expected, but in all this, the governments and their over optimistic reporting has not led to serious questions and questioning by the press either, which is an issue and remains to be so. That part is now gaining visibility when we see that two senior executives are banned with the reasoning ‘a threat to UK financial stability‘, I am not stating that this is not the case, but the fact that two individuals can have this strong an impact is equal worry on how the banks high executives could have allowed for such risks to remain in place, moreover, the fact that this is done to these two, why are their bosses not mentioned or part of the conversation as to what is regarded to be ‘a threat to UK financial stability‘? That part is clearly missing.

This now reflects back to the US.

For this we need to take an academic step back in time (see the TARDIS on your right). On August 19th 1988 Richard B. McKenzie wrote ‘The Twilight of Government Growth in a Competitive World Economy‘. Initially he focuses on “Technology is gradually eroding the monopoly power of government and is thereby reducing people’s incentive to control governments (or the people who run them). This is the case because the capital in capital-ism is becoming far more elusive and far more difficult to control–by governments“, so we see a view that in 1988 someone reported on the dangers on how technologies might enable big business, but will cause erosion within governments. Simply stated, most governments are confronted with the twilight in their pants, flaccid and to some even regarded as redundant. His paper is more about the impact on technology, but there are a few gems that have been ignored by spokespeople and reporters at large. The quote “Democratic governments are necessarily constrained by the rules of politics. For example, these rules require that a majority of the voting representatives approve fiscal and regulatory policies. Rules of democracy also force politicians to face periodic elections and to be held accountable, within limits, for what they do. If politicians raise taxes and expand business regulations, they have to consider the possibility of being turned out of office“, might be accepted as a mere fact, yet consider ‘voting representatives approve fiscal and regulatory policies‘ and ‘the possibility of being turned out of office‘. Now we get the issue that has been playing for almost a decade. By not approving fiscal and regulatory policies politicians could stretch their time in office. So, is my premise correctly, by stating that acting has consequences, does the inaction guarantees the opposite? Proving one is not a premise for proving the other, yet in all this, we see the elements of the economy that has been plaguing the people since 2005. Now consider the following: “In general, a growing number of policymakers see a need to make America ‘competitive’ again, mainly by releasing government constraints on capital and income“, here I am not in agreement. Actually I am, providing that accountability will be taken into account and as such accountability will become a massive part in the change we require. Here we see the link towards the UK, the banning sounds nice, but until what extent? How can some be ‘punished’ whilst we see stated that they never deliberately or recklessly breached the rules? Which might be a discussion for another day.

So where do I stand?

Is this the case that these events are mere flickers of the light? This remains an option, we are all fixated on the US and their 18 trillion debt, the UK has a trillion and small change in debt and both are realising that they have degraded their populations as upcoming slave labourers for whomever holds onto those debt slips. I admit that this sounds ludicrous, but is it that far-fetched? Consider the loans you have, ALL your loans, now consider the loans your government has, and now consider what happens when they default. Do you think that things remain the same? No, your loans will now suddenly be adjusted due to risk and you will end up with an additional 2%-10% (there is no way knowing of how much you will face). Now, some will state that default is an illusion and that the no government will default. Really? How long until we all realise that Greece can no longer be saved? They call it ‘debt forgiveness‘, but it remains a default. Carmen Reinhart is Professor of the International Financial System at Harvard seems to be trivialising it in an article, as I see it (at http://www.afr.com/opinion/signs-of-sovereign-debt-default-loom-20160110-gm2s05), we see quotes like “creditors may be overstating its potential external impacts“, which might have been true in the past, but we see little regard on the impact of the Euro when Greece defaults. There is no way it will not impact. The bulk of the Euro nations are so deep in debt that these hundreds of billions will impact them. I reckon the day that happens it will not be a good day to be a Greek outside of Greece. These issues are elements of a needed change. We need to make big changes and they will have to start this year. Every year that changes are delayed means that less people will have any options down the road. It is the direct and pragmatic approach to triage in an economic environment. There are no shortcuts to resolving any of this. There is only the harsh reality of changes, legislative, regulatory, procedural and then operational. It can only be done if all are aligned in that same goal, which implies that politicians should be left out of it (even though that is not a reality). The action by the bank of England might be a first spark, yet it is a spark that might go nowhere, if you doubt this then contemplate Tesco v Pricewaterhouse Coopers [2015], when exactly did that happen?

We need change, massive change, it was stated by many, not just me, but when will it come?

Here is the crux of the danger we face, whatever change we need, it needs to be implemented by politicians, all fearing the flaccid twilight in their pants. In France Marine Le Pen is trying to force change, to give France to the French, this scared Hollande and Sarkozy to the extent that they collaborated in a coalition, just to keep any victory away from Le Pen. Consider that part, two political opponents collaborating BEFORE the election, regarding who will win. That is what nations face. In my view that action was not about the good of France, that was about keeping the status Quo for big financial behemoths like Natixis, one of many who would lose out on billions when change happens. So as we see we need change, we are confronted with the people who have, as I see it too many self-interests at play, how can this ever go right? In that same way we have Nigel Farage in the UK. Here the UK has an advantage as the Conservatives have been trying to get the damage down as much as possible. It has been a bumpy ride for them, but there is progress, even as the waters seem to work against them, the UK is moving with many more options than the US or Japan has. The other Euro players (those with the Euro) are nervous, their nervousness increasing every day and faster as we see the back set by markets. In that regard, other nations have their own issues that are pushing things down. The Dutch pensions have breached solvency levels. They are below the required 105% levels, some have it as low as 101% and one even at 99%. They are facing the issue of combined value of pension assets fell by £6 billion, rising bond yields reduced the total liability by £20 billion. How will those be further impacted with the economic forecasts as they are diminishing and even further when those who invested in government debts see that the first one, Greece can no longer pay them! What do you think will happen? Are these just bad panic mongering words?

Can we perhaps consider that as events of the last few years have unfurled the way I expected, when they did not (as some did), we only saw a mere setback in the critical timeline, only to see these events come again with a much higher need for funds. In all this many forgot about Norway and their dwindling profits. As their wealth was oil and oil went from price X, to price X/4, their deficit went through the roof. Norway started to use their oil funds to plug their deficits. A story that got to Bloomberg, but did not get the visibility it should have had, because it gives us another nation that is not able to pull its own weight. I do not mean that in too bad a way, only in the realisation that the nations that have an economy where its governments have correctly budgeted for the year has now been reduced to less than 5, it is a stretch that Greece can topple the EEC, there is however the issue that the pressure from Greece will reduce the error margin of Italy and France to 0%, which is really a bad thing.

So will politicians remain flaccid admiring the twilight in their pants for the neediness of their own future, or will we finally see the first drastic legislative changes we need to charge up a start to regulatory changes?

 

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June 13, 2015 · 11:51

If at first you don’t succeed!

That was the first thought I had when I saw the article ‘Academics attack George Osborne budget surplus proposal‘ (at http://www.theguardian.com/business/2015/jun/12/academics-attack-george-osborne-budget-surplus-proposal) and the title reflects on them as well as on me. You see, as stated more than once before, I have no economics degree, but I have insight in data, I am not a bookkeeper, but I know how to keep my own register (I’ll let you boil down that conundrum by yourself).

So as I have a go at 77 of the best known academic economists, I present the first quote, which is: “George Osborne’s plan to enshrine permanent budget surpluses in law is a political gimmick that ignores “basic economics”, a group of academic economists has warned“, here we see the first failing of these economists. You see, the first rule of a basic economy is plain and simple:

Do not spend more than you earn!

That has been a massive need for over 20 years! Some ‘academics’ convincing that the budget could be X (whatever the amount is, now they tell us that X = Y (part of our costs) + Z (the interest and minimal payback on a massive loan that allows us to do more). At some point, one politician was stupid enough (or forced) to do this, but then the next one did it too and so on. Now we have a game, because of a group of flagellationists, we are all whipped into a place we never wanted to be, which is deep in debt!

Were those economists wrong?

They were not IF (a very loud if) the politicians would have diminished the debt, which is now 1.5 trillion pounds. You remember the first formula (X=Y+Z), now let’s take a look. You see, the numbers have been shifted again and again. Some now state that the interest is £42.9 billion per annum (2013 numbers), So now we get X = Y + (42.9 + 30), which is the annual interest and the paying down the debt at 2%, let’s not forget that at this pace it will still take 50 years, that is, if we get a budget that is actually set!

There are other complications that will make ‘Z’ higher, or ‘X’ a lot lower, when we consider maturing bonds and all other methods of ‘borrowing’ funds. You will see that the only winner is the bank. Whomever gets paid 42.9 billion is getting that as a guarantee without ever working for it. You the readers in the UK are doing all the work for that bank. The economists are not trying to tell you that. They come with ‘it is a very complex situation’ or my favourite ‘it would take too long to explain it all’. Yet, in their own words, ‘basic economics’ is actually really simple.

Do not spend money you do not have!

Now we get the quote “the chancellor was turning a blind eye to the complexities of a 21st-century economy that demanded governments remain flexible and responsive to changing global events“, which I see as a half-truth! You see, economics are quite complex, but they are only complex because economists and their friends in the financial sector MADE it complex! They get all this money for free from governments all over the world. They do not want to change that ever!

For the sake of the United Kingdom, the Commonwealth and our sanity, George Osborne is making that change. If previous Labour (especially Gordon Brown MP) had not spend the massive amounts they had, the UK would be in a much better position, but that is not the case. The economic view of ‘flexible and responsive’ is a valid point, but previous events turned ‘flexible and responsive’ into non-accountable overspending of funds that were not available. It will take a generation to clean up. The issues in Greece got so hairy that the President of the United States put his foot down, 2 days later the IMF walks away. An economy so deep in debt, an economy only representing 2% of the economy of the EEC could be able to topple it all. That is what many do not want to address!

This gets us to a linked quote in the article ‘Greece running out of time to avoid default, leaders concede‘ (at http://www.theguardian.com/business/2015/jun/12/greece-running-out-of-time-to-avoid-default-leaders-concede), where we see: “Greece has less than a week to strike a deal with its Eurozone creditors to avoid defaulting on its massive debts and perhaps being kicked out of the single currency area, with German leaders and top European Union officials now conceding that default is the likeliest outcome“, so as you might recall that Greece claimed that a solution was ‘almost’ there, I will show you the ‘flexible and responsive’ side to the word ‘almost’.

You see, “I have had sex with Laura Vandervoort almost every night!” Monday almost, Tuesday almost, Wednesday almost. You get the idea, ‘almost’ here is like ‘as soon as possible’, at times it means ‘Never!’ (it would be so much fun to get a mail from Laura stating that she will be here ‘as soon as possible’, I am not beyond irony and it will make me chuckle for weeks!

Why this example? Well, I have been telling the readers for months that Greece has been screwing us around, you see how the words just fall into place? The economy does not! This is the clear evidence that the law must change. While all the players getting nice incomes were saying ‘tomorrow’ ad infinitum, George Osborne is saying ‘Now!’

The fact that this is essential is also seen through the acts of President Obama. Tax evasion was high on the G-meetings (G-7, G-20, take your pick), yet, when Australia introduced the Google Tax, we see the us Treasury making waves to stop it ‘US Treasury pressures Tony Abbott to drop ‘Google tax’ ‘ (at http://www.afr.com/news/policy/tax/us-treasury-pressures-tony-abbott-to-drop-google-tax-20150428-1mu2sg). They stated it as: “Mr Stack said it was critical that Group of 20 countries like Australia that were participating in global tax negotiations did not pass laws on their own that would contradict international agreements“. In my words, my response would be: “Mr Stack, you and your administration are a joke! You have not acted for over three administrations in reigning in corporate greed, your American corporations were cause of a financial meltdown 11 years ago, a meltdown we are all still feeling. In addition, you have not set ANY solid ground in countering tax evasion, other than the windy speeches we have expected to see, all speech, no action! It is time for the American administration to put their actions where their mouths have been for too long!” Not too diplomatic, but the message is coming across I reckon. The commonwealth can no longer adhere to the irresponsible acts of a nation that is 18 trillion in debt!

So as I see it the quote “they argued Osborne was guilty of adopting a gimmick designed to outmanoeuvre his opponents“. You see, this is not a gimmick, this is a direct need where the banks are no longer in control, the Commonwealth is a monarchy, that is there to give a future to the people and to keep them in a place where they have a future. For now Greece basically no longer has a future. It has spent it all, unless the US treasury comes up with 50 billion (quoting Jean-Claude Juncker), it only has time to find a solution that will not end the existence of Greece.

This is the massive difference that the people keep on forgetting. The UK is a monarchy, with a sovereign ruler who has accepted (or: was given) the responsibility to keep the nation thriving and its people moving towards a happy place that has a future, America is a republic, where the elected official is depending on large contributions, especially from the wealthy. It has given in to big business again and again for the last 20 years. As we see the USA, a nation more and more drowning in civil unrest, we should consider how they got there. The got there by lacking in laws that held big business and government to account of spending. Here we now see “George Osborne’s plan to enshrine permanent budget surpluses in law“, this is an essential first step to get us all back on a decent track where we are not in debt!

Getting back to the formula. The last step we were at was: X = Y + (42.9 + 30), you see, the people all over the place have been ‘deceived’ to some extent. Deceived is hard to use, because the word ‘misrepresented’ is a much better word. X is what the UK receives. With large corporations ducking their fiscal responsibility, the value of X goes down, with unemployment issues and zero hour issues, the people get less money and as such they pay less taxation, so X goes down even further. Now we get the set costs. (Y), more and more elderly, means more costs and they do not pay taxation. So the elderly drive down X a small bit and drive up Y a large portion. I do not hold that against them! They worked, they made Britain (and Australia) great! They did their share, so they get to sit down to enjoy the tea and biscuits (an additional fine venison steak would be good too). These are all elements that the economy is confronted with and as these economists have been to enabling to big business, we see that we must put a stop to what is happening. We have no other choice, or better stated we have less and less options. These economists are all polarised into one direction, one direction that has not worked for over a decade. We get misrepresented by ‘managed bad news’ and other forms of information we can no longer rely on.

Consider that I have been on top of the Greek case for some time now, so when we see (at http://ec.europa.eu/economy_finance/eu/countries/greece_en.htm) the fact that the forecast of Greece is 0.5% in 2015 and 2.9% in 2016, I wonder how they got to it all and if such misrepresentation should not be a cause for liability? Is it based upon raw data that we can trust? You see as these economists all rely on the ‘formula’ and all concede that it is a good model and a real predictor, my gut has been a lot more accurate and these economists had to adjust their numbers downwards time and time again. The last part for Greece is seen in the Financial Times, it reflects on what I stated earlier (at http://www.ft.com/fastft/343532/eurozone-financial-fragmentation-hits-5-year-low)!

“Initiatives such as the European Stability Mechanism, a permanent rescue fund designed to limit financial chaos that might arise from an event such as a Grexit, as well as the €1.1tn quantitative easing programme, have helped insulate the rest of the Eurozone from Greece“, to ‘limit financial chaos’, is that not weird? Many players downplayed the impact of Grexit (especially France). So this ‘rescue fund’, how much is in it? You see, that will become a debt too and where does it go? France, Italy? They are in deep financial waters. So how much more will be needed to stop France and Italy to go over the edge?

Simple economics is to lower debt, now to throw money from other sources at the interest of debt, which solves nothing! George Osborne was right before, he is right now. The fact that the Economy players, the IMF and America do not like it when others are out of debt, that does not mean that we should adhere. I showed how USA adheres to big business (including banks), it is time to be self-reliant! So as rating agencies set the outlook bar to negative, we should start to wonder, who do they serve? You see, if the ratings are about the ‘now’, so the outlook is moved from Negative from Stable for an event that is not happening until 2017. Guess what, the UK was always stable, and when these ratings are shown to be ‘flawed’, then what?

To be honest, S&P has an interesting paper on this (at http://www.standardandpoors.com/aboutcreditratings/RatingsManual_PrintGuide.html). Here we see the quote “Credit ratings are opinions about credit risk published by a rating agency” and “Standard & Poor’s ratings opinions are based on analysis by experienced professionals who evaluate and interpret information received from issuers and other available sources“. Now we get the final part. The first quote is clear. It makes it known that this is a matter of opinion. The second quote is how they get it. Now tell me, how many of these ‘77 economists’, who were thumping George Osborne on all this, are involved in setting economic predictions? Are they linked to people who do set the ratings? I am not certain of the first premise, but I am decently certain of the second premise!

So are these economists, who claim that it is about ‘governments remain flexible and responsive’, is that it, or is the game getting rigged because the few are willing to sell the larger proportion of a population down the drain for the interest of self?

Consider the information given and work for a place of common sense. You will soon realise that the path of George Osborne is the right one, moreover, when in your life, has debt ever been a good thing and how is the debt working for Greece?

 

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March 17, 2013 · 22:16

Savings from a bailed-out nation?

We all know, hear and get frustrated with bail-outs. So why is Cyprus different?

The bail-out will not just happen in one direction. It is not that the Euro zone and the IMF get out the wallet and give this small Island a $10B voucher. The other side here is that people on Cyprus will be taxed up to 9.9% on their savings. If your savings are under 100,000 Euro then you will only lose 6.7%. This is a new situation. It only effects those with money on a Cypriot bank.

So what is this Cyprus? For those not growing up in Europe, you are less likely to know about it. Cyprus is part Greek, part Turkish and all independent. There is more, the Island has only 1 million citizens, so we are looking at a $10,000 per person support fund.

The natural question following is how this place be THAT incompetent? More important, how can a bail-out be handed to this place without DEMANDING the replacement of that entire government? From my point of view, it is either too corrupt or too stupid to continue. Should we not take a more assertive stance before handing out cash you can pretty much kiss goodbye?

In addition, in my view all banks connected to this situation are to directly report to a Euro zone auditor. The rights of those banks, their managers and its board of directors are to be nullified!

It seems that we are way to ‘forgiving’. It is time to show banks that those who play to this effect get their rights, their bonuses and ego removed.

My method of reasoning is simple. President Nicos Anastasiades stated to Reuters as published on 16th of March “we would either chose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis” he was referring to Cyprus Popular Bank, the recipient of the ELA facility for months, and Bank of Cyprus, the island’s largest bank. It is time to put all cards on the table, it is time that all its citizens, as well as all others to know the unimaginable bungling by those who claim and should know better. Their rights to trading removed at present and it should only be allowed by a controller of the most conservative and cautious kind. It seems to me that most banks and traders seem to have reverted to desperate Las Vegas gamblers who have one last chance and they gamble it all. Banks should not be allowed to do this. For those thinking these words are empty and hollow. Consider the SNS bank, the Dutch bank that was considered ‘too big to fail’. It is now nationalised. It seems to me that handing out money to a group of people ready to gamble it away at a moment’s notice should not be allowed in these positions.

It is however not fair to blame just the banks on this. All this seems to be directly linked to Government bonds as well. One set at $1.5 billion being due on June 30th. So again, we see some kind of borrowing strategy. Politicians who are spending others people’s money and then some more. Living in luxury and using up cash that place NEVER had in the first place. These kinds of bonds are actually usually very much desired because they are considered to be risk free.

Here is my second thought. ANY nation trading in these bonds, while levied above a certain level are no longer to be considered risk-free. I know that this is what those standard & poor ratings are all about, however they had downgraded the status of Cyprus as follows: “We have assigned a recovery rating of ‘4’, indicating an expected recovery rate of 30% to 50% in the event of a default, however unlikely.” (Source: S&P website)

They valued it unlikely? Well, that might be the case, but others have to foot the bill at present.

I suggest that ALL ratings of bailed-out nations are set to CCC (Yes, I can see the panic now!) until the bail-outs are paid back. Italy will not likely enjoy that either! (Mi scusi Presidente!)

Some will come with the reasoning that this is bad because it does not allow for restoration. Is that true? Look at Greece and Italy. Paying up is not on their mind. They seem to be pussyfooting around, all caught between bankruptcy and civil war. Italy might not be on that train yet, but one promise from politico Berlusconi and suddenly he is back in the political race. Yes, that is what Italy needs, more irresponsible spending at present. It is utterly unacceptable that these places play nice weather, with currently no way of paying back. Greece is likely the best example. They current;y seem to have no way to EVER pay it all back. Its people are rioting blaming all but their own governments and banks. For them, consider the amounts your governments spend while they never had the money to begin with. All those VERY willing to borrow to them should be as per now be visibly named too.

These people are all relying on anonymity. Take that away and they lose the option to walk in the streets thinking that life is great. In the end it comes back to accountability. The only fun part for some in the case of Cyprus is that it is filled with Russian mobsters who are likely to lost 9.9%. They really do not like it when their money is messed with. So, should the government and banks suddenly leave THOSE accounts alone, those involved should name and shamed. See what the local population will do then!

However, I am digressing from the issue at hand. Cyprus and the bonds are only part of the topics. It is becoming clear that the discussion should focus towards the S&P ratings.

Quoting Wiki it starts with “Standard & Poor’s (S&P) is an American financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds.”

Wiki is not really an academic standard, however to quickly find a fact it is just as useful as anything else.

The actual issue is the word ‘analyses’ in the entire sentence. In addition I would like to quote a small part that was published by James Rowe on the IMF site on April 20th 2010. I know it is a little old, but there it does state: “IMF says is the newest threat to the financial system: growing sovereign risk.” This has been known for a while, and yes, not only WAS it a risk. I am stating that it STILL is. The S&P rating shows that very part. I am making the additional observation that the analyses might be flawed on a few levels (assumption on my side) as we look at the Cyprus issue. That view is only strengthened as we look at the rating that S&P still seems to hold as per December 12th 2012. “Ratings On Greece Raised To ‘B-/B’ From Selective Default On Completion Of Debt Buyback; Outlook Stable” (Source: S&P).

This is part of the problem! Consider the headline from Feb 20th 2013 “Greek Workers Walk Out in Fresh Austerity Protest” (Source: NY Times). These people seem to not get it, or at least not accept what is needed. They start riots and they start strikes. I am not blaming them. They got handed a raw deal. Unlike some optimistic analysts, who are claiming to see light at the end of the tunnel. There is serious threat that Greece could still collapse if these events are not stemmed. As such, the S&P rating of Greece (and other bailed out nations too) should for a long time stay in the C-range. Reasoning is that bail-outs are limited and there is NO guarantee that it will continue if debt control in Greece is not successfully done. I think that it is irresponsible to take bail-out money in consideration to up the borrow margins. I get it, as a factor, the bail-out is valid, but the fact that it allows Greece a ‘better’ credibility does not seem valid. Even if we consider ‘renewing’ current bonds, Greece (and others) must be used as an example to make it clear that the current path is running out of space fast. Especially as several other governments keep on overspending, with too small a chance to keep their budgets under control. I am against these levels of overspending and enabling by others whilst we all know that there is no end in sight. And it is not just Greece. These visible steps will show clearly to the other nations like Italy and Spain (to name but a few) that the good times are gone, perhaps forever.

It is time for financial institutions and governments to adjust their thinking and approach.

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