Oh what a surprise!

[Shaft120]

Having said all that however, I suspect that the major problems in the financial system are exemplified by the hedge fund boys and not the likes of BarCap anyway - Crispin Odey took home a bonus of £36m odd this year from memory. But the government can't do anything about the hedge funders' bonuses.

I actually launched several of Odey's funds myself. They are a slightly different proposition. They are wealth managers and their bonuses are directly related to how much they make for their clients. If Crispin took home £36m, imagine how much his cleints made.

I agree that you dont need to be that intelligent to make a fair buck in the financial services. But then everybody has that career choice. You don't have to be a public school toff to do it. I left school at 16 and went to a comprehensive.

[Surfer Ross]

I just sit back and laugh at all these people playing with hypothetical wealth, and it is completely hypothetical.

The US and British economies are going to implode within the next 20 years unless the rot stops NOW. Market economies depend on production. If your country is not producing, refining and exporting, you are dead in the water. The USA especially has been riding on the crest of a wave that was generated 30 years ago, it can't continue.

A new-draft policeman in the US earns about $80k-$100k a year. This is in a country with a far lower cost of living than our own. Public sector wages such as this are only sustainable when you have a large manufacturing base to sustain that economy. In short, you need to be producing something better or cheaper than the next guy to guarantee the long term value of your currency and the continued strength of your economy. The single case of this being done brilliantly is China, who will be the worlds largest economical and military superpower for most if not all of the next century.

The UK manufacturing sector has just turned in some very good results. It is this alone that is stopping us from dropping back into a double-dip recession. We need to expand on this. For the last 20 years, everybody has been educated under the assumption that they'll end up working in an office type environment. For want of a better phrase, this is utter b*ll*cks.

In my opinion, Government cuts are possibly the worst way to deal with a fragile recovery or faltering economy. Building, manufacturing and delivering quality products at a realistic price is the key to delivering a fast recovery and long-term economic stability. Paying huge bonuses to people sitting in an office playing with money that is no more real than the Bogey Man is just re-setting the clock for another cycle of boom and bust.

[Apache]

The UK manufacturing sector has just turned in some very good results. It is this alone that is stopping us from dropping back into a double-dip recession. We need to expand on this. Start manufacturing again. For the last 20 years, everybody has been educated under the assumption that they'll end up working in an office type environment, for want of a better phrase, this is utter b*ll*cks.

Building, manufacturing and delivering quality products at a realistic price is the key to delivering a fast recovery and long-term economic stability.

Totally impossible to do in Britain as our competitors are those very same chinese you mentioned. British workers have far higher expectations regarding pay and conditions than Chinese workers, therefore our mass market products will never be competitive. We need to think novel, low quantity, high value manufacturing, and simply be streets ahead of the rest of the world.

We used to do this, but the education system is no longer geared up to producing the very high calibre engineering / science output, and those it does produce find there are few businesses doing the type of work they are qualified for so... off they go to the States to receive the pay and conditions, and the quality of life they deserve.

Sadly, as you say, I think we're fooked. We've been out of the game to long, and have no pool of experience or expertise to fall back on. If it was to happen, it would require a C change in education, industry and government.

[flounderbout]

I actually launched several of Odey's funds myself. They are a slightly different proposition. They are wealth managers and their bonuses are directly related to how much they make for their clients. If Crispin took home £36m, imagine how much his cleints made.

Agreed they are a different proposition. That was my point - it is easy to criticise the banks that were bailed out by the taxpayer (and I do), but the hedgies have (arguably) had much more impact on the general financial stability of the system, which suggests that putting a stop to "publicly owned" bank bonuses is not really addressing the correct issue, which is what sort of regulation is necessary to prevent damaging economic speculation. I guess the flip view is that only by aggressive shorting etc can you correct the inefficiencies/misvaluations in the system. I don't really know enough to say one way or another. But I was just saying that the government obviously can't do anything about those bonuses, which makes the rest of the argument look all a bit futile.

In fact some of the big fund names (like Hugh Hendrie) have been forecasting financial meltdown and the collapse of the toxic mortgage business for many years, so on one view you could say they are perfectly entitled to profit from it. I met Hugh Hendrie in the course of work - he was a very impressive man indeed, and he certainly made a heap for his clients in the bad times, which is aways a pretty good indicator of someone who knows his onions. He was certainly predicting the downfall of Fannie Mac and Freddie Mae almost a decade ago.

I agree that you dont need to be that intelligent to make a fair buck in the financial services. But then everybody has that career choice. You don't have to be a public school toff to do it. I left school at 16 and went to a comprehensive.

It's got nothing to do with public schools or background. One of the great attractions of the city is that it provides one of the few level playing fields in terms of background, class, education etc. The question is whether if no bonuses, or only strictly controlled long term bonuses were on offer, would you be able to staff "bailed out" banks with people able to achieve success. Seems to me if the answer isn't yes, then there needs to be a pretty good reason why not.

I'm all for rewarding success, but a bonus system which rewards success with no means of punishing failure is not exactly a recipe for financial stability. Try playing poker in a game in which if you scoop the pot you get to keep it, but if you go broke you get unlimited free reloads, and see whether that promotes "good" poker play...

[Pelicanbill]

"Please Sir, I want more!"

Once upon a time one went to work to earn a living and one took pride in what was done. Increasingly the so called quaint concepts of loyalty and trust and humble expectation were a bedrock of negotiation. Quite simply, you got shagged by your Boss, and you edukated to understand your status.

Now, with education eroding the very foundations of our Society, it is perhaps understandable that we have arrived at our current state. But don't expect me to feel any sympathy for the poor bankers.

Why I wonder is it possible that the banks seemed to have pulled back from the brink of disaster; to be able to sit back and relax while counting a sizeable wedge of dosh reserves; yet all of this with a zero % interest rate! Nope, don't bother to explain the ins-and-outs, I'm just making the point that maybe there should always be zero interest ..... that way it remains impersonal

I hate Thatcher as much as I hated the Unions. I then found that our Tony has as much sincerity as that other person, the one who said "Read my lips..." I do not belong to any particular faction. If bankers are to be allowed a bonus, then so be it. All I ask is the requirement that my bank be permitted to pay me a bonus each year for being such a brilliant Builder .... Now, some ideas please:
a) What begging letter shall I write?
b) Can I make it tax free?
c) Does it matter whether I made a profit or not? Perhaps Customer Satisfaction is redeemable?

[flounderbout]

All I ask is the requirement that my bank be permitted to pay me a bonus each year for being such a brilliant Builder .... Now, some ideas please:
a) What begging letter shall I write?
b) Can I make it tax free?
c) Does it matter whether I made a profit or not? Perhaps Customer Satisfaction is redeemable?

As I understand it if the house you build stands up, you get a hefty slice of the house to keep. But if the whole think falls down, then you get to shrug and we all pay. Sounds fair to me... oh wait

[Shaft120]

I'm all for rewarding success, but a bonus system which rewards success with no means of punishing failure is not exactly a recipe for financial stability. Try playing poker in a game in which if you scoop the pot you get to keep it, but if you go broke you get unlimited free reloads, and see whether that promotes "good" poker play...

This is a good analogy. You would get a lot of people wanting to play that particular poker table. Derivative trading grew out of good intentioned business practise. If a farmer wanted to have the security of a known income in future years, he could sell the fruits of his labour in advance. Therefore even if the price of said fruits fell, he would have already sold them for a price agreed much earlier, giving him a guaranteed income and the ability to plan his business expansion. Thus a futures contract was born. These type of products ballooned into all sorts of weird and wonderful things, such as credit defaullt insurance - where people covered the risk of a lender not being able to pay back a loan or martgage. All of these things are fine as long as the total risk of such products (the maximum amount you are liable for if the worst case scenario happens) is backed up by cold hard assets, such as cash or shares.

The problem occurs when people dont hold the assets and they speculate on the market. So instead of a trader having 100 shares in Vodafone and then agreeing to sell aforementioned vodafone shares in 3 months time for a set fee. They agree to sell the 100 shares in 3 months time for a set fee without owning them in the first place.

Effectively just gambling. The problem is instead of just loosing your stake you could loose a lot more. Imagine that you agreed to sell those 100 shares for £1. But after that three months when you need to hand over 100 shares, the price is £100 per share. You've just lost nearly 100 times your stake. As the share price can feasibly go up with no limit, your potential losses are uncapped as well. If you owned the 100 shares in the first place, it's no problem. Now speculative derivative trading has no real value to the underlying business as you are not actually buying shares and investing money into the business itself. However, it can have a huge impact on the volatility of the share price as people rush to cover open positions. As people bet on share prices falling, it can become a self fulfilling profecy as actual share holders sell out of positions they fear are going to go through the floor.

In reality, speculative derivative trading is no better than spread betting and a lot worse than straight forward gambling on the gee gee's. It should be banned. However, this will only work if it is banned throughout the world at the same time, as otherwise any country which bans the practise instantly becomes uncompetitive with the rest of the world and as I said before, with 60% gdp coming from fainancial services it would be economic suicide.

Whats particularly hypocritical is that many countries which have outlawed gambling, openly allow uncovered derivative trading. Yet there is absolutely no difference between the two.

[blackpoolsparks]

On a slightly different note....
One of the issues that never gets mentioned, as it's probably too difficult to listen to, is the fact that part of these so called toxic debt/loans were mortgages taken out by individuals such as ourselves.
I know that a large portion of the problem can be attributed to property developers, such as in Ireland, but not in all circumstances and certainly not in the U.S.
I lay the blame squarely on greed or rather self importance.

One could argue that the banks should have been better regulated and had tighter controls on their lending criteria. However, they never forced a loan on anyone. The people I see around me on a regular basis, who are now having to sell up, go bust, etc. are the people who simply overextended their credit and we're maintaining their lifestyles on borrowed money.

I myself acquired a self certified mortgage. I could of been less than honest and declared a much larger income in order to purchase a bigger house, but where would I be now, or rather when interest rates return to normal. Right next to the very people I mentioned earlier.

So simply put, part of the blame has to lye with greedy, self important individuals.

Sometimes its not easy looking in the mirror.

Double-dip recession?
Wait till interest rates rise again.

I know that I've oversimplified the issues, it does in my opinion need to be addressed and owned up to.

[Diezel Weazel]

After reading all your points ..... the way I see it then !!
Bankers get bonus's for good results ..
So bad results n were all in line for a windfall rebate eh .. yea right n we could all be millyanaires

Jess
"Cos short cuts can cost more in the long run"

[KERRSURF]

Lot of sense in that post.

Sadly, the days when Britain made stuff to sell to other countries (a major income stream back in the day) has gone, as has the expertise and infrastructure to support it. Short sightedness in previous governments (of both colours) saw to that.

It galls me to say it, but we are reliant on derivatives, as you say. How I wish we had a strong manufacturing / engineering base again.

Manufacturing has enjoyed the largest area of growth as we drag ourselves out of this mire.

[KERRSURF]

I think bonus payments should be linked to the national debt, if it's reduced then the bonuses go up.

[Shaft120]

We need to think novel, low quantity, high value manufacturing, and simply be streets ahead of the rest of the world.

We used to do this, but the education system is no longer geared up to producing the very high calibre engineering / science output, and those it does produce find there are few businesses doing the type of work they are qualified for so... off they go to the States to receive the pay and conditions, and the quality of life they deserve.

Sadly, as you say, I think we're fooked. We've been out of the game to long, and have no pool of experience or expertise to fall back on. If it was to happen, it would require a C change in education, industry and government.

Totally agree - we need to be investing in Science and Technology reaserch and development and fostering high calibre exams and university courses within education. These are subjects we are historically excellent at when we fund them properly.

With regards to what people have been saying about Goldman Sachs as well.

Everybody in the sector knows that if you work for Goldman Sachs, they take their pound of flesh from you. The unwritten deal is that you are expected to work all hours god sends. I'm talking until early hours of the morning quite often. It is not uncommon to regularly do 80 hour weeks. However, the only reason they get away with this is because the staff expect a large bonus and the prestige of GS on the CV. Permanent cars are laid on to drive you home at night. If GS didn't pay vast bonuses, they would not get this kind of commitment. It attracts a certain type of individual and their business model certainly works for them as one of the most successful investment banks in history.

I'm not defending them. I'm cerrtainly not one who would want to work there. I'm just saying, that a little context on the bonus system sometimes puts a little perspective on it.

[Shaft120]

On a slightly different note....
One of the issues that never gets mentioned, as it's probably too difficult to listen to, is the fact that part of these so called toxic debt/loans were mortgages taken out by individuals such as ourselves.
I know that a large portion of the problem can be attributed to property developers, such as in Ireland, but not in all circumstances and certainly not in the U.S.
I lay the blame squarely on greed or rather self importance.

One could argue that the banks should have been better regulated and had tighter controls on their lending criteria. However, they never forced a loan on anyone. The people I see around me on a regular basis, who are now having to sell up, go bust, etc. are the people who simply overextended their credit and we're maintaining their lifestyles on borrowed money.

I myself acquired a self certified mortgage. I could of been less than honest and declared a much larger income in order to purchase a bigger house, but where would I be now, or rather when interest rates return to normal. Right next to the very people I mentioned earlier.

So simply put, part of the blame has to lye with greedy, self important individuals.

Sometimes its not easy looking in the mirror.

Double-dip recession?
Wait till interest rates rise again.

I know that I've oversimplified the issues, it does in my opinion need to be addressed and owned up to.

Well said - I dont think you've over simplified it at all.

[TonyN]

I opened this thread expecting B/S media driven, scapegoat hunting ranting, and quite pleasantly surprised to find some real thinking going on.



Well done.

[Apache]

I opened this thread expecting B/S media driven, scapegoat hunting ranting, and quite pleasantly surprised to find some real thinking going on.



Well done.

Thanks Dad.