Sorry George, You've Lost My Interest. I'm not Investing ! ; Why we need to build an alternative to our current banks. Where people can invest their money knowing it will not be used to under mine the economy.

In recent days, George Osborne and David Cameron have announced that there are to be new regulations which will protect retail banking from the so called 'risky' investment banking.....

If the new law gets through, it will take at least another year before it will begin to be enforced.

There are however some reasons why we should not count on this new regulation actually ever making any difference to the banking system. These reasons are as follows;

First of all,
Politicians have been talking about this division between retail banking and investment banking for a number of years, but have avoided actually activating the rule. This is because of the effects it will have on the investment banking side. If this law is enforced vigorously on the British banks, it should mean investments in deposit account are only used for mortgages to buy homes, personal loans, overdrafts, and similar. I think this is more likely the illusion that George Osborne would like to create. The chances of this actually happening are I think are in the region of one in a million.

The reason for this is that, investment businesses like hedge funds and private equity companies borrow money from all the big banks. Up to now, much of this money has originated from ordinary deposit accounts.
Therefore, the deposits of ordinary investors has bolstered activity in the private equity buyout business, Asset management businesses, hedge funds etc. All activities by the previously mentioned firms, whilst carrying out their activities then support the stock markets, and thus the stock markets support these businesses. Therefore, contrary to what is popular belief, ordinary money in ordinary account is an important part of investment banking. Come the day you ring fence that cash, investment banking, stock markets and all that are related are without doubt going to suffer as a result...............

It is likely to affect the share values of big companies. Hedge funds and asset managers are always buying and selling shares in these companies, and the money they borrow which originates from me or you affects the values of the big companies as a result. If there is suddenly a reduction in the amount of cash available to these investment businesses, share values on the whole will reduce. In fact if you were running one of these investment businesses, you would probably want to start selling assets off as soon as you are aware that the ring fence becomes imminent ! Currently, in the beginning of 2013, the big business buyout market seems to be on the move, with a number of big business buyouts such as Heinz- $28 Billion, Virgin Media- $23.3 Billion (£15 Billion) , the merger of American Air Lines & U.S. Airways, total value $11 Billion . Also, potentially one of the biggest ever mergers has just been given the go ahead between X-Strata & Glencore by all share holders and various regulators......If there was to be a significant change in the way the banks operate, which reduced the money on the investment banking side, the success of the afore mentioned deals could be put at risk. When buyouts take place, the last thing the new owners of these companies would want, is for there to be a reduction in available cash to buy them should they be put on the market again in the future. A significant reduction in available cash to the business finance world will damage the values of big  businesses. It could contribute to a 'recession' in the business finance world. Some hedge funds and asset managers could even decide not to take a chance, and decide to sell off their assets long before any enforcement of a ring fence begins and shut down completely. Then a domino effect could begin, leading to a major stock market crash ! Has George Osborne thought of this? Without doubt he has. I don't believe this ring fence is going to be enforced, because it simply will not work. I believe the whole thing is to create an illusion that something has been done, when virtually nothing has. The proof of the pudding will be in a years time when the rule begins to be enforced, if given clearance. The retail side will have to invest in the things we all need the banks to invest in. Mortgages and loans for home improvements. Otherwise the retail side will be investing in nothing at all which will mean that it will not be possible to pay interest on deposit accounts. If the rule really is enforced, there are other major problems ahead.....

The second problem is that, as much as politicians may refer to the U.K. financial system, implying it as being separate from the Eurozone and the United States. The truth is that all though there are variations on regulations, the U.K., the United States and Europe are all part of the same financial system. It is also joined to financial industries all round the world. Nothing could have made this more clear than the financial crisis.
Even though reducing the amount of money available to the apparent riskier side of 'investment banking', on a world scale, would probably reduce the risk of the industry creating problems in finance and the wider economy, there are clear problems on individual countries reducing access to available cash. One is obviously that hedge funds, asset managers etc will turn to countries where restrictions are less, where there is no ring fence of retail banking. This is in fact what made the U.S. and the U.K., the leaders of the world finance industry in the build up to the financial crisis. There simply were very few restrictions to stop banks lending cash and gambling with it, and lending to other businesses that only wanted to gamble with it. I'm fairly certain that George Osborne and David Cameron have no intention of the U.K. taking a back seat in the financial industry. For one reason, governments have a direct pipe line into the financial system. This pipe line, the leaders certainly will not want to obstruct. Has George Osborne worked out away of creating a ring fence around retail banking, without affecting investment banking. May be he has. But I think there needs to be a lot more clarity on how exactly this ring fence is going to be applied. I hope this is not a publicity stunt for the build up to the next election, which is a lot of hot air and no substance. After all it wouldn't be the first time that a high profile announcement by the current U.K. leaders evaporated into nothing within a few months.

Incidentally, going back to the international financial system. Obviously individual countries bringing in their own regulations to improve their finance industry will always invite problems as other nations could exploit the situation and profit from even more deregulation themselves. (The U.K. has done this at great cost to the rest Europe in the past !) This is why this problem needs to be dealt with unilaterally. It simply will not be solved any other way. Until this happens in fact, I do not think there will be any great improvements in the way the big banks take care of our finance. This is one of the reasons why we should begin to look to a new alternative for those who want to opt out of the current mess!

Big Buyout 2013 No.3 ; Heinz by Warren Buffet & 3G Private Equity.

Heinz, a food manufacturing conglomerate is to be bought 50-50 by Berkshire Hathaway and Private Equity company 3G.

Berkshire Hathaway is a holding company owned by Warren Buffet that buys shares in many businesses and  also buys whole business. An insurance business that is owned by Berkshire Hathaway provides cash for many of the investments made by Warren Buffet. This means he has less interest to pay on debt, as he has more direct access to capital than many other similar companies who also aquire shares and businesses. 

Warren Buffet has accused private Equity firms of being "financial engineers who don't love their companies."

The total amount of debt which will be put on Heinz, relative to the total size of the deal is comparitively low compared to other deals involving private equity companies.

However, Heinz will go into an additional $12 billion of debt....... in addition to its current debts !

If you don't know much about the buyout business , it may come as a shock that the banks, adding  $12 billion of debt to this business can be justified, when the company is not necessarily going to look visibly different when this deal is completed. Thus, where this $12 bn is going to be recovered from in order to pay the mortgage is worryingly unclear !

As much of a shock this may be, the debt added as compared to the total value of the deal is only 42% debt as compared to the total deal value. In private equity buyouts,the debt to total deal value ratio is usually in the region of 60% and 80%. You can see other X-Economics posts explaining how banks justify this debt. But the point here is that, Heinz costs are just about to increase substantially as a result of this debt.

Prices of Heinz products are likely to rise. Or the business may cut costs by redundancies or complete closures at the more expensive plants. You should note (It goes without saying really..)also that the debt added is likely to reduce expansion possibilities ! (I mean real expansion- building new plants, not more buyouts!). This is because banks are more likely to lend for existing assets, rather than assets which do not yet exist ! To put another way, they encourage a lack of progress rather than progress in big businesses !

Is this really good business ? Well it clearly isn't. This business with no doubt would be better off continuing as before......But this is providing great business for the bankers providing the debt and other financial businesses including Berkshire Hathaway and 3G Capital. Stuff the rest of us...it seems !

Finally, as proved with a previous buyout of a large company by 3G, Burger King; If you can keep everything intact for a while, you have the option of floatation on those ever enthusiastic stock markets, some time in the future, where you can recover all your costs, make a profit  on the sale and leave the debt with the new share holders..........Who could be you .....if you have a pension fund or similar investment !.... Because in the stock markets....No one is using there own money !

How to Create an Economic Crisis !

The following are a list of ways you could contribute to an economic crisis.

These were all valid ways to create an economic crisis in 2007

What is remarkable is that after all the tax payers money going into enquiries to discover the cause of the crisis, non of the contributors below have been removed four years on.

Politicians like David Cameron and Boris Johnson are in their current posts due to promises which they made which were to pressure the banks into changing their ways.

It is time for the British public to be more careful about who the future leaders are.

1.......The Decision of the governments not to Police the behaviour of individual employees within the finance Industry.

Recently, UBS, HSBC and Barclays have been fined many millions of dollars, all for completely different reasons. The problem is these fines will have little affect on the individuals who are responsible. In fact the individuals in many cases will have departed when these payments have to be made. You may just as well fine the customers of these banks simply for choosing the wrong business to look after their finances, because it is these people who will be paying the bill to the regulators involved. Interest rates on credit cards will rise and pension funds will suffer as a result of the losses to these banks, as well as many others to be fined over the LIBOR rate rigging.

Whilst the governments choose not to target the individuals in most cases for their crimes, there will be incentives for investment in illegal businesses by the finance industry, Ponzi schemes, and excessive risk taking with invested money. This is because there is little chance the individual will end up paying for the crime even in the event they are caught in the Act. 

2.......Misunderstand a heap of invested money as a signal for demand of 'Bankster Trash'.

Stock brokers in the stock markets use invested money to buy stuff like shares in businesses, commodities, business debt, mortgage debt and government debt.

Stock brokers only buy stuff if they think the value of something is going to rise. This can be influenced purely by the fact that the money being made available to stock brokers is rising. The modernisation of parts of the world, and people from those locations opening bank accounts and saving money means that the pool of money being made available in the stock markets grows. This can influence the prices of homes, businesses and commodities purely as a result of stock brokers touting up the prices. However the reason for this is total nonsense as it has no genuine link to the product being bought. The price rises as a result of money sitting innocently in a bank account. The owner of the money doesn't want what is being purchased with it. The stock broker doesn't want the product. He only wants the profit when the product is sold on.

In the lead up to the economic crisis this growing heap of cash in bank accounts and investments was a major issue.

3.......The selling of debt throughout the financial industry................

This is definitely one of the major contributors.

If when you lend money to some one, you had to wait till the person you lent it to paid you pack, it would make you careful who you lent money to. You would also take more of an interest in what the loan was for.
Because of the demand for investment material, as detailed above in no. 2, it has become easy for banks to sell debt to other financial institutions. Before the financial crisis, all kinds of debt was rising in price as demand for investments caused the price to rise. This made it easy for the big banks to replace lent out cash to be leant again, again and again. Each time passing the risk of the borrower defaulting on the repayment of the loan. The problem is, although the bank has passed on the risk. The risk is still in the system and some one else is going to suffer if the borrower defaults. However, financial institutions found ways of spreading this risk by bundling and mixing up lumps of debt and giving them investable product names like CDOs (Collateralised Debt Obligation). 

4.......Big business Buyouts.........

Big business buyouts are a major part of investment banking.

When a large company buys another company, it will borrow the majority of the money (80-90 %) from banks.

 However the costs of these buyouts are substantial.

Some of these costs can be recovered due to the extra market dominance the combined companies will have   over competitors. Other savings can be made such as combining administration from the two companies to one office. Reducing costs of executives and employees.

This can often work though even when it does, it may be temporary as the banks may finance a similar merging of two bigger competitor companies.

The important thing to understand here is that the banks think they can justify putting companies into major debt, when putting the two companies together would not actually require them to borrow a fortune from the banks. They could combine resources of the two companies without a bank needing to be involved.

 The reason it has become standard procedure is that;

a) Banks allow executives of these companies to furnish themselves with pay increases which can be funded by the debt, whilst the debt may be leant against one or other of  the combined companies. It's one of the reasons why executive pay has risen so dramatically as compared to ordinary employees. Though it may be the employees will pay for the extravagant pay of the executives when the company collapses under debt and jobs are lost! 

b)As mentioned in '2' above, there is a mountain of cash which must be invested in something. If the investment banks stopped this so called 'investment in business' prices of other types of investment would probably rise, or oddly enough, the housing market throughout the world could get a much needed boost as the surplus cash would have a use.

Due to mergers and buyouts, banks effectively put themselves on the 'pay rolls' of these companies. When we pay for products and services provided by the companies, we are also paying bankers bonuses. Bonuses which in many cases are not justified !

5.......Lending to Landlords in Preference to ordinary people who want to own their own home...........

The banks lending to landlords to increase their property portfolios in the lead up to the crisis was a major part of the housing boom. In the years that led up to the crisis, in the U.K., landlords though clearly in the minority were buying up a large proportion of the homes that were going on sale. As rent charged by land lords does not reflect the cost of buying the property, tenants are paying a much higher price for their homes. In many cases the cost is so high, there is no job available which pays well enough to pay the rent and other costs of living. Working people who are renting their homes are getting hit twice by the landlords. Once for the increase in costs of their own home. Then again for paying higher taxes for the people who have been effectively pushed out of their potential job as a result of rising rent. Therefore paying unemployment and housing benefits.

David Cameron promises growth. Save your breath Pal ! The landlords will eat it up as soon as it appears with increased rent charges because of governments sherking their responsibilities and not regulating this economy wrecking business !  

6.......Derivatives............

The justification for the existence of Derivatives is for the hedging of risk.

A simple type of derivative is a futures contract for a crop.

A farmer can with the help of a broker can sell a futures contract for a crop which will , all being well, be harvested in a few months time. The farmer will get a fixed price at harvest time, regardless of the success of the crop. Even if it is destroyed in a flood. The value of a derivative is derived from the value of the crop at harvest time.

The derivative removes all risk from the farmer, but the risk is held by who ever is holding the derivative at any time. If the value of the crop at harvest time is higher than that paid to the farmer, then the holder of the derivative will make a return. If the harvest is destroyed then a loss will be made.

Banks also use derivatives to protect themselves from interest rate changes in a similar way to the farmers protecting their income from bad weather......

A slightly more complex derivative is a Credit Default Swap. This is derivative which takes on the risk from a  lender of a borrower defaulting on a loan. The holder of the derivative will gain if borrower pays up the debt, but could lose substantially if the borrower defaults.

Derivatives become even more complex with CDOs- Collateralised Debt Obligations. These are combinations of Credit Default Swaps which are packaged up together. They will be debt from a range of sources such as home mortgage debt, business mortgage debt originating from buyouts and private equity firms. The idea is that these enable investors to reduce risk by not putting all eggs in one basket.

The problem with these CDOs is that although they do spread the risk, the risk does not disappear. However, it encouraged banks to lend more and more money in the build up to the crisis. The even bigger problem was that to lend to more people and businesses, they had to become less fussy about who it was lent to, because all the most credit worthy people and businesses already had their share of debt.

In the boom that preceded the financial crisis lots of money was lent for corporate and management buyouts involving many of the worlds biggest companies. The most concentrated areas for these businesses being the United States followed by the United Kingdom. (The two countries with the biggest financial industries) This involved the lending of around 80% mortgage by investment banks for a large company or private equity company to buy another company. The problem is many of these investments were successful on a short term basis because costs were slashed after the take over with redundancies, closing of research and development departments and selling of important assets such as the property the businesses operated from. All this worked wonders for the balance sheets of these companies. The problem is this was short term. Once you have peeled the skin off an orange, you can't create the same illusion again and again, even if a bank gives $5 billion to try. There is going to come a time when the end of the road is going to be reached with these buyouts......and  I think returns on pension funds is evidence that time is looming! The problem is, while Collateralised debt obligations exist, banks can get rid of risk. That risk ends up in pension funds and other types of investment including mortgage accounts. This is why I  have "Your investment could cause an Economic Crisis !" written on the back of my jaguar. They did in the last financial crisis, they are continuing to contribute to the current economic crisis and will continue to do so. Probably until people take more control of their investments !

Although most of the national press never seemed to realise it, whilst sub prime loans were blamed for beginning the crisis, many of the people in the U.S. worked for businesses that had been involved in buyouts, and thus lost their jobs as the debt ruined these businesses. The employees mortgage payments therefore defaulted. Also the mortgages themselves were investments in other peoples mortgages and mortgages held by private equity companies and big companies that had bought out other companies. Investments that the sub-prime loans were invested in were failing because lots of big companies in the States were failing due to irresponsible debt put on them by the banks. The 'buyout business has however been protected by the financial industry by claiming that Sub-prime loans were the cause of the financial crisis. If these buyouts had been blamed for the financial crisis it could have jeopardised the whole of the business finance world including the future of the stock markets. As it stands, it looks like the home buying market has been near to sacrificed in order to save the more lucrative business finance world and stock markets. 

7........Short Selling............

This involves the selling of shares you don't own !

You borrow the shares off the owner so you can sell them. The reason being, you are expecting the price to drop......... So you are selling the shares while they are high in price. All being well, after you have sold the shares, the price drops and then you buy the shares back. You then must give the shares back to the originator of the shares along with the profits minus your own cut of the profits.

The problem is, when lots of shares in a business are sold in a short time. It will inevitably cause a downward trend in the price of those shares. So you could short sell a load of shares in the same company, owned by different parties, knowing that you could manipulate the market downwards for those shares. Hence, if you are clever enough, its difficult to lose......Notice how completely irrelevant a business, its executives and possibly loyal workers could be in relation to share prices whilst some one is short selling their shares!
There have been new rules to restrict certain aspects of short selling enforced by S.E.C and the F.S.A., since the financial crisis, so there is no doubt it was one of many contributors, but short selling continues today.

8........Privatisation .........

Privatisation is taking a business owned by the state, and therefore already paid for by hard working tax paying people and then selling it to investors. Much the same as selling a house you have fully paid for to a landlord, who you will pay rent to for the rest of your life. (The difference is you won't receive a load of cash when a business is sold off as the government will get it although you helped pay for it). You will pay rent (sorry, I mean the costs of the business)  for the rest of time at the amount that the 'landlord' of the business wants you to pay!

The buyout world contributed to the financial crisis as lots of private equity debt became toxic whilst many American businesses were collapsing under debt originating from buyouts. Many of these businesses started off as state run industries. As soon as any state owned business is privatised it immediately goes into debt. This is because they are never bought for cash. Instead they are used for fodder for pension funds. Banks will lend the money on the condition the pension fund will pay the mortgage off, irrespective of how well the new company performs. Usually the debt does not cause too much problems when first privatised, but this is clearly because the government (at least in the case of the UK)  sells at a price which will allow the business to continue problem free at least until it is well clear of the hands of the government. Obviously any mishaps that would occur shortly after privatisation could back fire on the government. The problems often arise after  the second and then third buyouts of the same business. Each time it is refinanced and  the price and debt goes up each time. Not so much because of the success of the company, but because pension funds and banks need feeding with new business and their desire to get involved touts up the price of these businesses! Eventually, the effects of the debt that is put into these businesses will be felt by the customers, as the costs of the debt will be added to retail prices. Privatisation did contribute to the financial crisis but it has had a much more worrying contribution to the the much bigger world economic crisis.

This graph shows that although wholesale prices have been blamed for rising consumer prices, there is something else influencing the upward trend in electricity prices in the U.K.

Would this have happened if the industry had not been privatised?

9.........Out of date Education.....

10.......Press & Media  -The finance industry's ability to manipulate them to mislead the public......

11......The vested interest of governments not to interfere with the finance industry- This vested interest, we are all suffering for............

12...... Not changing the system even when you know it is wrong

13......Justifying the financial system purely on the jobs it creates within the financial industry without accounting for the hundreds of thousands of jobs in other industries which the financial industry has cost.

14......Politicians not being held to their promises which get them the votes to get elected in the first place.

15......Governments using the wrong measures to control the economy.

16......Rating debt, using Credit Rating Agencies who get paid commission on the debt they rate !
 The better the ratings they dish out, the more debt they will get to rate!......

17.....Regulators like the F.S.A. and S.E.C. being paid proportionally to the profits of the finance industry.

18....Sub-prime Loans....These got most of the blame, but I think you will have gathered by now that there was a good deal more going on that also contributed to the financial crisis and the continuing economic crisis four years on.

UK Care Home Debt Crisis; There are too many investment and finance people on the 'payrolls' of these businesses ! These people are conveniently out of the jurisdiction of the police.The result is that the businesses collapse as if they had been infected with a terminal disease....

Unfortunately certain kinds of vulnerable people can become the targets of a sickening type of capitalism which we see all too often in the U.K. The care home industry is one of the most affected by misguided investment which is having a parasitical affect on these businesses. The basic problems are simple. There are simply too many investment and finance type people on the 'payrolls' of these businesses. Many of them can not be trusted to have any involvement in a business, yet they find themselves  conveniently out side the jurisdiction of the police.These people can achieve a healthy return on investment money whilst the debt being loaded onto the businesses increases almost uncontrollably.

Around 430,000 elderly and disabled people live in long term residential care in the UK, but only one in ten are now in council or NHS run institutions.

Voluntary and for-profit companies account for 57% of the independent sector compared with only 5% in 1989.

Southern Cross was the largest care home business until it collapsed. Many smaller care home businesses collapsed before Southern Cross.

If you want to see how Private Equity Firms, Buyouts and Privatisation all with help from banks, combine to create problems with various types of services, then you won't find a much better example than what has happened to Southern Cross Health care. I think it is a good example why our financial businesses need to be policed. At the moment, certain of types people who may call them selves business people can manipulate money from a business whilst slowly destroying that business .............and there is no one to stop them.

The problem is, these so called business people provide so much 'business' for our finance industry, that they get left alone by most politicians...................These politicians have various ways of profiting from allowing this destructive manipulation of these businesses and so often have a vested interest, thus it becomes even more difficult for those who want to outlaw this business...............


..................Here is what really happened to Southern Cross Health care............

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August 2002

The management backed by West Private Equity and Healthcare Investments Ltd, acquired Southern Cross through an £80 million  management buyout..........................................


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The definition of a Management Buyout (MBO) in general terms is a buyout which involves the management buying the company from the current owners or parent company.
..........But, in reality, a management buyout could be the management buying the company from the current owners ,.....who could be the same people.


So why would the management of a company want to go through the procedure of effectively buying the company from themselves?

The reasons are likely to be a combination of the following:- 

1....... The owner of the company would like to sell the company, but doesn't want to lose control of it.
2........The company currently has minimal or no debts.
3........The owners want to benefit from the value of their company by way of debt borrowed against the company's value. (But have this benefit without selling the company).

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September 2004

A secondary buyout of the business by the management  together with Blackstone Capital Partners followed for£162 Million.
Blackstone then acquired care home owner NHP (Nursing Home Properties) for £564 Million, which saw a competition investigation by the office of fair trading.


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As you can see with this second management buyout, the same management who bought the company from themselves the first time have now bought it for a second time. This time with a new mortgage and much more money. Along with the help of one of Britain's biggest private equity companies, Blackstone.

Its easy to forget that whilst this financial madness is going on, there are employees of the business trying their damnedest to provide comfort to vulnerable old and disabled people. Few, if any would have any idea of what was going on , on the finance side of the business. 

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November 2005

Ashborne Group Care Homes, comprising  10,000 beds in 193 homes was acquired for £85 Million.



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Okay, you will have noticed that Blackstone were subject to a competition investigation by the office office of fair trading. Its really good to know that their are business regulators in the U.K. who you can depend on ! 

After the acquisition of Ashborne, Blackstone re-organised the company.............. They called their new strategy a,"Sale and lease-back strategy."     ?

It basically involved all the property owned by Southern Cross Health care being sold off.

NHP bought up the properties and rented them back to Southern Cross Health care. NHP became a property only business.

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NHP               Sold to 'Investors'


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At the point that the original properties of Southern Cross Health Care were sold by Blackstone to 'investors' (Don't know at the moment who these investors were), Southern Cross lost control of it's future costs. 

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July 2006    Southern Cross Health Care floated on London Stock Exchange.

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Southern Cross collapsed as a result of the rent it was having to pay on the properties it used to own !!!!!!!!!!!
As in many other cases, the collapse of many businesses which seem to be happening on a weekly basis, many are avoidable. 

Note on Management Buyouts (MBOs) & Private Equity Companies.
A lot  of the information here is obviously second hand. X-Economics is having to use information made available by the business executives of the 'victim companies' and also the finance businesses including banks and private equity companies. In many occasions, where a news paper passes on information on  a management buyout to the public, the businesses involved may not have told the whole truth. The term 'Management Buyout' is one that could be used to put investor's minds at ease. The term implies that the people who may have been running the business are now 'putting their money where their mouth is'. The willingness of the management to put their own money in creates an illusion that they have no doubts in their own confidence in running this business. Hence encouraging investment and building potential value should the company be floated on the stock market..............Of course, this could be all an illusion. The management are simply co-operating with a private equity company who  want to buy the company. But want to give the deal some synthetic stability, due to a minority of people who have detected problems that they believe have been caused by private equity companies. The illusion is to make investors believe that the management is making the big decisions. In this particular example, there is no doubt that the short term gains and asset stripping, notorious in the private equity business destroyed Southern Cross and there will be many more similar cases in the near future.

                                     





                                                  to be continued............

The 'OCCUPY' movement; Why so much dedication by protestors, but little progress ?

First of all I would like to make clear that 'Anti-Crisis Economics' or 'X-Economics' is neither activist or protest group.

However, the information currently made available through these blogs will shortly create enough understanding of the current financial system, the problems within it and the proposals of how financial businesses should be working. ......One of the problems of the Occupy Movement is that ..............

1...........The public do not quite know what they have been protesting about.
Much of this is down to the press,.....for a number of reasons.

         A)A lot of the press do not understand what the problems with the financial system are.
             They have qualifications relating to journalism but may be finance is not their thing....

         B)Many national news papers have a political view which protects capitalism as their standard procedure regardless of the problems that unregulated capitalism has on everyone throughout the world.
This can also be said for TV companies.

Most of the news paper articles I have seen on capitalism protests seem to come up with this same phrase; 'Its about corporate greed.' This phrase is repeated again and again on different occasions which in my mind makes it look like the real reasons given by protesters are not reaching the news papers or TV screens. This one has probably been substituted for more detailed explanations which the news paper owner may prefer to keep from the public for reasons which may affect a corporation that owns a news paper (or TV company), or may be has been influenced by a wealthy individual from a large business or a political figure.

2............The protesters in many cases will not know the extent of the problems in the financial world or specifically what they are. However, there are plenty of good reasons for them not to know these details....

- You will not find what the banks do today in any degree course or at any other level. You will get a kind of image of banking that would fit into some kind of make believe world where the selfless financiers are bettering the world through their investment of our money.    I believe this to be for the simple reason that the banks do not want the world to know what they really do. The governments that are in control of education have their own reasons for what seems to be an eduction system that protects capitalism. The problem is that the kind of capitalism that is being protected is a destructive kind.

-Even qualifications in Economics are completely useless. I was going to study economics myself after leaving the finance industry only to find that economics barely recognises the existence of the stock markets and doesn't recognise the problems that banks and various types of investment can cause within the economy. Having worked within the stock markets I knew that the stock markets and the banks were a very influential force in economics ! After a lot of thought I decided a degree in Economics would be a complete waste of time as it would give a false image of what the real influences of economics really were.

-There are obviously plenty of books on banking and qualifications that go with them. The image of banking given in the books and portrayed by the education authorities is misleading. Ive read enough pages of these books to discover that they have gaping holes where question need answering, but these questions strangely go straight over the heads of the so called experts, who have no doubt got their degrees. The problem is , the degrees they have got will be as biased as the stuff they are writing!

 What I do on these blogs is give information about stock markets, banking and the influence on businesses and economics.............But all these books and banking courses are supposed to be on exactly the same subjects........I don't want to tell you whose wrong and who's right. Take a look at some banking books. Then take a good look at these blog posts.......Then make up your own mind..................

COMET IN ADMINISTRATION; INVESTORS TO BLAME?

Comet, the electrical retail store went into administration today.

There are a number of factors which contributed to this......

Many we hear about every day, in relation to other businesses which have suffered similarly.

The problem is the press and media are reporting a one sided explanation of the circumstances. The point of view which has been portrayed by the executives and may be financiers involved with these companies. This may be of a view that those involved may want to portray....................

In February 2012,  Comet was bought by private equity company, Hailey Holdings & Hailey Acquisitions in tandem with advisory private equity company OpCapita LLP for a token £2 ($3.23).

(You should note that;
Hailey Acquisitions was formed as recently as 2nd November 2011 and registered at Companies House in the U.K. ! There are no other companies under it's control other than Comet. The name may be a coincidence or may be not.)

The buyers received a £63 Million dowry payment from the seller. A dowry is basically a gift. Some may call it a bribe. This kind of thing should not need to go on. If this kind of thing went on in the stock markets it would be illegal. This is because it would be perceived as manipulation of the markets. If you don't think a  share is worth buying on it's face value, then you should not be encouraged to buy that share because the seller has slipped a few notes into your back pocket. In this particular episode, the amount going into the back pocket is a cool £63 Million ....Instead of a share in a company, it's a whole company... .............. It wouldn't be quite so bad if the money belonged to the seller, but it will be investors money that will be used for this gift incentive.  ....................... Those investors will obviously suffer as a result of this payment. The executives of Kesa Electricals, the business that owned Comet will however not be affected by the loss. In fact they will be charging their investors for their services, regardless of how badly their performance may be.

OpCapita is run by ex banker Henry Jackson. OpCapita has taken over just four businesses since it was formed including Comet. Of the four, two have gone into administration. The other company to go into administration was one of Britain's higher profile companies, MFI.

Although Hailey Holdings and OpCapita received the £63 Million dowry payment, they will not need to invest all of this in Comet as their investors are other investment companies. Their main investment is led by  Grey Bull Capital, an investment company based in London. Also investing were Elliot Advisers from the United States.....................................................

For the benefit of outsiders to this business, some of the things to note are as follows:-

Hailey Acquisitions was formed in November 2011. Just three months later, it was taking over one of the U.K.'s biggest retailers! ...................................If you have started, and currently run your  own business, this will be difficult to comprehend. ................................There is no sign of building up a reputation and a customer base............So how is it then that a business that has been formed so recently take over a high Street retailer of such importance to the U.K?  ....... ...................................  ..............................................................................to be continued....................

Mitt Romney ; This is the Wrong Man for President

I'm amazed by the support that this man has received, including one claim from Piers Morgan in a recent news paper article that "Mitt Romney may be the United States' cleanest politician ever. "With the information that has been available on this politician, I find it amazing the previous editor of the U.K.s Daily Mirror could come out with such a rediculous statement. My opinion of the British press was not very high to begin with, but has plummetted when a generally respected person can come out with a statement as ridulous as this. I have to say that I am highly suspicious that this has something to do with Piers Morgan's celebrity status in the States.

ALTERNET.COM, an American web site recently gave some more accurate details about Mitt Romney.

"Far from the respectable business man he claims to be, Romney has long engaged in horrific practices that mock American values."

"Republicans like to paint Romney as an entrepeneur whose activities at Bain Capital have benefited Americans."

"Romney has spent his career offshoring and outsourcing American production processes and associated jobs to countries like China where human labour is valued in the market at a very low wage rate."

"The sub-human conditions at these production facilities represent things that Americans are strongly opposed to. Child abuse, squalor, forced over time and peanuts for pay."

"A report recently released by the 'Institute for Global Labour and Human Rights' reveals that while Romney was deeply invested at a firm called 'Global Tech', low pay and horrific conditions were status quo at it's Chinese appliance factory. At this factory a fence topped with barbed wire encloses the workers and prevents outsiders from entering."

"From April through to August 2000, Romney and his 'Brookside Capital Partners Fund',an affiliate of Bain Capital, the company Romney formed- poured around $23 Million into the Global-Tech sweat shop in Dongguan, China. Among the defects outlined in the report were the following :-

"* Factory workers made 24 cents an hour in 1998 and less than 2$ a day. Wages in Global-Tech were less than 2% of average U.S. wages."

"* Whilst being CEO, Romney appears to have been un-interested in calling for improvements at the facility. Today the sweat shop is still a horror where starvation wages prevail and workers wrights are non-existent. Over crowded filthy dormitories, rotten food,routine 15-16 hour shifts. 105 to 112 hour weeks are the  norm."

"* The appliance factory has 800 student interns, 16 year olds forced to work repetetive exhausting 15-16 hour shifts on assembly lines with no over time pay."

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"On February 16 2012, Mitt Romney brought hypocrisy to new heights, assuring the public that, "We will not let China steal jobs from the United States of America.""

Like I tried to say in August, this is definitely the wrong man !