The Bankers Bone Us

Thanks to PK Munro for the inspiration for the title of this post!

The RBS, OUR bank, was ready to shell out millions of Pounds in bonuses in spite of the fact that they seem not to have been earned and were among the least popular things to have done in recent weeks.

These people took jobs whose aims must have been to build and rebuild the bank: their normal duties. These people took jobs KNOWING that the bank is essentially a public sector bank and public sector people do not normally earn private sector bonuses.

I heard this morning that the contracts of these people are in the public domain but I have to say that I have not looked for them and have not read them. However, I would have liked one or more journalists and/or politicians to have set out the terms in these people's contracts that have triggered the potential for the bonuses that had been announced.

The most important thing for everyone to appreciate is that we need these banks to be planning for LONG TERM stability and prosperity. So if there are bonuses paid in three or four years' time then no one will object I think.

Paying bonuses in shares, however, is a bad idea as share prices rise over time, on average: this means that even if the bankers do a poor job the shares they are awarded will be worth a lot more in a couple of years and they will be paid a bonus far in excess of the merit of their recipients!

More nonsense from the banking world

Duncan Williamson

Managing and Interfering

Nick Edwards has written a very engaging autobiography that I recommend everyone to read. 

Edwards is a doctor in an A&E department at a General Hospital somewhere in the UK. The book discusses two main themes:

medical stories

management and interference stories

I enjoyed the book and reviewed it in full for my own web site: http://www.duncanwil.co.uk/book_reviews/edw.html

There are many business, management and even commercial lessons to learn in this book.

DW

Happy New Year

Dear All,

There aren’t many of you because I don’t post to this blog anywhere near as much as I want to. My resolution this year is to post here at least once a week.

Happy new year to you all anyway.

Duncan

Happy New Year

Dear All,

There aren’t many of you because I don’t post to this blog wnywhere near as much as I want to. My resolution this year is to post here at least once a week.

Happy new year to you all anyway.

Duncan

Don't Trust the Office of Budget Responsibility!

Don't trust them and here is why ... this is simulcast on Duncan's Diurnal Diatribe blog too

It was autumn budget statement time in the House of Commons the other day and the Chancellor of the Exchequer went on and on about how bad it's going to be be for you and me!

Cut a long story short: if you know the HOCKEY STICK EFFECT then what you are about to see will shock you. The OBR data that I have seen and on which the Chancellor's statement and financial policies are based contain many hockey stick effect examples: here are just two.

In case you think I made these two charts up for a joke or for a more nefarious reason, take a look at my excel master.co.uk blog post from earlier today where you will see more evidence and a link to the source of the data I have used: go here ... http://excel2007master.wordpress.com/ and look for the post entitled UK Government Spoke the Words, here is some Excel Analysis.

I think it's possibly shocking and potentially massively damaging for all of us.

DW

Gulf Airlines: must read

I am a gold card holder on Emirates because my work and leisure travel normally take me further afield than Bradford and Birmingham.

As a result I like to see what is happening to Emirates from time to time and have just come across the following article as I was doing a bit of research into international expansion for a colleague.

Not only Emirates but Qatar Airways and Etihad are also going for broke in the world of civil aviation.

The figures are stunning, the competition livid: read the article and make up your own mind!

Here are a couple of diagrams from that article, too, to whet your appetite:

http://www.economist.com/sites/default/files/images/images-magazine/2010/23/bb/201023bbc564.gif

http://www.economist.com/sites/default/files/images/images-magazine/2010/23/bb/201023bbc569.gif

Find the article itself at http://www.economist.com/node/16271573?story_id=16271573, published on 3rd June 2010 by The Economist

Duncan Williamson

Cameron: no thanks

Looks like the Tories are doing what I predicted, gaining the most seats in the House of Commons.

Here's another prediction: this will be a failure government. The Tories' team is inexperienced and filled with oafs. All they have ever done is blether for a living. Probably clever lads but not good enough.

DW
Sent from my BlackBerry® wireless device

Try Doing Business Online at Holiday Time

This is a simulcast with Duncan's Diurnal Diatribe
Have you ever had a problem and tried to solve it online over a bank holiday weekend? For the last few bank holidays I have had something to try to resolve that surfaced just as the holiday had started or was about to start. Something different each time.
In all faith and with confidence you write to the support line, help line ... and explain everything. Then sudden death. Nothing happens. Nothing.
So this has happened again: I got an email on Thursday to tell me that the latest upgrade to some software that I want to upgrade has arrived. Yesterday, Good Friday, I tried to upgrade but for some reason it won't accept any of my email addresses as my registered address even though my copy is fully registered.
So I wrote yesterday morning to ask how to resolve this and pay for the upgrade. Death by silence.
If I complain about this or make a suggestion when they do reply, which effectively will be Wednesday because it's American software and I am more than a working day ahead of them, they will ignore it as a whinging Limey's rant!!
End of rant!
DW

How NOT to dismiss someone

If you’re a moral coward and you have been advised to dismiss some people, this is how you will do it:

• start a rumour that some people are to lose their jobs and refuse to confirm or deny it
• when the time comes, send them an email
• tell everyone who’s left that they MIGHT be next if they don’t behave

What’s the right way to do it? Be a man and interview everyone, the exit interview, to find out what they know and think about everything and to explain to them the why and wherefore of their dismissal. The exit interview is also a chance to offer help if they need it or ask for it.

Duncan Williamson

If you must Prepare a Forecast ...

... do it right!

I have just read a report by the IDB (International Development Bank) on estimates of reparation costs for putting Haiti back together again. The headline figure is that it will cost $13.9 billion to rebuild homes, hospitals, schools, roads and other infrastructural elements. The question is, where did they get that figure from? Well, here's the warning, they did it by using regression analysis.

Using historical data and regression analysis can be fine but in this case I seem to see that historical data is probably not sufficient in the case of Haiti. Secondly, that $13.9 billion is at the top end of the confidence limits for just one of their estimates.

Here's the URL: read it and see if you agree with me ... you might not. Why not give me your comments? Happy to hear them.

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35072649

Duncan Williamson

Bankers' Fees

There's a lot of talk about the bonuses that bankers are being paid these days. There's also a question that no one is asking, however, which is: where do these bonuses come from? After all, even if I pay, say, 5% or even 10% on my overdraft, it's going to take a lot of very big overdrafts to finance some of the bonus payments we keep hearing about.

At least part of the answer to the question of where these bonuses come from can be found in recent articles in The Financial Times newspaper:

• Floating: but plain sailing cannot be guaranteed By Jennifer Hughes, Senior Markets Correspondent 2^nd February 2010
• The real deal: Why it still takes courage to go Dutch By Lina Saigol 2^nd February 2010

In these articles we find that in 2009 the total equity raised worldwide amounted to $892.4 billion and in 2008 total equity raised worldwide amounted to $635.1 billion.

Moreover, we are told that the following are the rates that bankers charge their customers to take their company public.

Fees	%
USA	6.7%
Europe	3.2%
Asia	2.5%

The FT provides us with the regional breakdown of where all of this equity was raised and by making some assumptions as to which fee rates apply to which region, I have come up with the following analysis and estimates:

Equity Raised (from the FT)

$bn	2009	2008
North America	294.7	265.7
Europe	274.6	205.4
Northern Asia	115.8	30.8
SE Asia	21.8	14.1
Japan	62.7	15
Caribbean	0	1.2
Latin America	29.1	25.8
Africa	4.4	11.5
Middle East	4.6	13.4
Indian Subcontinent	22.1	14.1
Australasia	62.7	38.1
Total	892.5	635.1

Estimated Fees (my estimates)

$bn	2009	2008
North America	19.74	17.80
Europe	8.79	6.57
Northern Asia	2.90	0.77
SE Asia	0.55	0.35
Japan	1.57	0.38
Caribbean	0.00	0.08
Latin America	1.95	1.73
Africa	0.14	0.37
Middle East	0.15	0.43
Indian Subcontinent	0.55	0.35
Australasia	1.57	0.95
Total	37.90	29.78

There you are: in 2009 I have estimated that the total fees that banks have charged for helping companies to raise their equity by $892.4 billion amounts to $37.9 billion. Of course, the fees do not represent pure profit and they are not the only basis on which bonuses are calculated. However, you now have a better idea of where the bonus calculation begins.

Duncan Williamson

US Double Standards

Remember when there was the US tyre company scandal, just a couple years ago. Goodyear was it? Everyone in the industry knew the problem and knew that many accidents had been caused by some rubbish tyres. There was a cover up initially and many denials.

Now Toyota has found a problem with the accelerator pedal on millions of its cars. Problem identified, solution worked one, repairs scheduled ... No expense spared.

Today I read that the US government has advised Toyota drivers in the USA to stop driving their cars and to demand a repair.

Well, that's one way to boost the image of your own companies: pour rubbish on the competition. Especially when the competition usually runs rings round you.

Very shabby.

Duncan Williamson
Sent from my BlackBerry® wireless device

Read that Graph CAREFULLY

Everyone here knows that I find it difficult to respect a man who feels able to spend $1,600,000,000 on his own job interview expenses but even Obama needs some protection from the badly drawn graphs and charts. Even the Financial Times can get it wrong!

Here is a graph cut and pasted from yesterday's Financial Times:

How about the corrected version where the vertical axis is NOT chopped off just below the half way point ... no such a drastic change over the year is it?

This post was also uploaded to Duncan's Diurnal Diatribe

DW

Follow your own advice laddie

I wish I had!

Just before he set off on a monster trip of the Far East, my nephew asked me for some advice. He wanted to know the best strategy for foreign exchange for his trip: he asked about taking dollars, traveller's cheques and so on. I told him, whatever you do DO NOT get your currency here in the UK.

As I was leaving Dubai I checked the rates there as I had a little bit of foreign currency with me. Why oh why did I not follow my own advice? I ran out of time and opportunity to change my money in the end although I did change a little bet at Dubai International Airport. The rate there was a bit worse than I would have got in town but I changed it.

Anyway, when I got to the bank here at home I found their rate was £:$ of 1.74 ... in Dubai the rate at the time I SHOULD have changed my money was £:$ 1.61.

Just imagine I was changing $1,000 ... in Dubai I would have got £621, here in Halifax I would have got £575, a difference of £46.

Don't do what I do, do what I say! What a clot I am!!

DW

Fantastic Communication of Numbers

Part of the way through reading the FT I came to a pointer that said, take a look at CEO pay in the oil and gas industry. The link that follows takes you to that page and it's excellent.

An apparently basic and simple chart but you can change the axes in real time, as they say. You can sort the order in which information is presented and clicking on a bubble in the chart will open up and page that flies in to give you a lot more information about the CEO you just click on!

Take a look at www.ft.com/ceo-pay and see what you think.

Duncan Williamson

The Financial Times REALLY Comes Alive

I have been a premium subscriber of the FT for quite a while now and have benefitted from online access, daily emails, an iPod FT Reader and so on ever since. Now, though, I can read a full facsimile version of the paper online every day.

Looks like a fantastic service.

Duncan Williamson

Here's a Tip!

There is some excellent news for anyone connected with an industry where it is traditional to give someone a tip for services.

I only learned relatively recently that it was accepted that people in pubs, restaurants and hotels who receive tips can be paid less than the minimum wage with the difference being made up with the tips they receive.

The benefit of that system was that employers gained and any advantage gained by the employees was stolen from them.

Well, there is good news from 1st October 2009! This is from the UK Government web site, direct.gov.uk

Changes to the law on tips

It will now be illegal for businesses to bring staff pay up to minimum wage levels using tips.

Derek Simpson, Unite joint-general secretary, said:"The Code launched today will help consumers see where the money left for good service is going. Unite wants to see all employers sign up to the Code and ensure that their staff and customers can be confident that staff are treated fairly."

The code of practice will be monitored with a review in one year's time.

See http://www.direct.gov.uk/en/Nl1/Newsroom/DG_181003

It is a disgrace that the previous situation was ever allowed to exist but now it has gone.

Duncan Williamson

T Rex to take over at M&S

At last that very ordinary man at M&S, Stuart Rose, has found a successor but it's rather an odd choice. While the British press is calling Marc Bolland the £1 billion man, people of my age will know him as a singer with the pop group T Rex from the 1970s.

And here he is: Marc Bolan, the photo ... sorry but the usually reliable Live Writer won't let me add a hyperlink here apart from this one ... http://i.realone.com/assets/rn/img/7/9/7/5/16295797-16295800-slarge.jpg

Duncan Williamson

A Smoother and more Productive POSITIVE Meeting

We had a meeting at work today on a topic that not everyone knew much about at the beginning of the meeting. Knowing that the topic could have been buried under a welter of negativity I suggested to the chairman that we split the meeting into two parts:

• positive comments only
• negative comments allowed

That is what we did and everyone stuck to the spirit of the split and the negative aspects of the meeting were relegated to the final 5% of it. The outcome was that the meeting was much more productive and, shall we say, positive?

I was very happy with that!

Duncan Williamson

RBS and Bradford and Bingley Class Actions

Interesting developments worthy of a mention are that some shareholders in the Royal Bank of Scotland and Bradford and Bingley are working on a class action for misleading them in prospectuses leading shareholders to subscribe to rights issues.

I have had a look at the RBS shareholders' action group web site and whilst there are some good details there, there does not seem to have been much to report there since August. Still, more power to them if their cases are valid and they make some good progress: this assumes that the shareholders were misled and so on.

For the RBS Action Group web site: http://www.rbsactiongroup.co.uk/

The B&B shareholders' action group has put together a similar case and similar web site and their site seems to contain a lot more up to date information and news. Not that that necessarily means anything. Also, the feel of this site is less professional looking than the RBS action group site: again, that might mean little of substance but I noticed it!

The B&B action group web site is here: http://www.uksa.org.uk/BradfordBingley.htm and you might notice that it is being hosted by the UK Shareholders' Association, which is the leading independent organisation which represents the interests of private shareholders in the United Kingdom.

Now that I have been to the B&B action group site I see there is a site for Lloyds' Bank shareholders as well as for Northern Rock.

Well, could be worth watching this development after all.

Duncan Williamson