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Archive for the ‘Politics’ Category

Why Oswald Gruebel Should Shut Up

Thursday, April 28th, 2011

The Swiss government is planning new, much stricter regulation for UBS and Credit Suisse (the two “too big to fail” banks in Switzerland). Oswald Gruebel, CEO of UBS, is not amused. While Brady Dougan, the CEO of Credit Suisse is applauding the new regulation, the UBS is implicitly threatening to move out of the country.

So, what is at stake? The Wall Street Journal spells it out clearly:

“Strict by international comparison, the draft law goes beyond the Basel III rules on bank capital. It would require UBS and Credit Suisse to hold at least 19% of risk-weighted assets in total capital, of which 10% would be common equity. By contrast, the Basel III regulations call for just 10.5% in total capital and 7% in common equity.”

The UBS is worried about this competitive disadvantage looking at rivals like Deutsche Bank or Goldman Sachs. In some areas, notably in investment banking, more equity has to be ponied up for risky business which put cost pressure on the bank as equity is expensive. However, these new rules will help the Swiss Banks to regain part of their reputation that has been tainted in the last financial crisis. Especially the UBS has detstroyed billions upon billions through risky subprime deals. In the end only the Swiss government, and ultimately the tax payer, has saved UBS from going the Lehman way. UBS should be grateful that this new law will make clear to the whole world how safe Swiss banks are. A priceless competitive advantage, especially for the wealth management division. At the very least, Oswald Gruebel should stop complaining and threatening the Swiss government who has saved his bank only two years ago.

 

Gaddafi’s Wealth, Revisited

Thursday, March 10th, 2011

In our last post we have asked ‘Where is Gaddafis’s money?’. Over the last few days governments around the world have started freezing his assets. You get some background here, here and here. It seems that governments are working more or less in concert on this issue. Yet it also seem that the Colonel from Libya has taken some precautions just before the violence started.

It remains to be seen what happens to Gaddafis’s assets when the war drags on or when he is able to overwhelm his opponents in Libya.

 

Where is Gaddafi´s Money ?

Friday, February 25th, 2011

Of course at this stage the amount of money Gaddafi and his criminal gang of friends and family have stolen from Libya is speculative, as well as the countries, banks and companies where it is hidden. However, the hunt for the money begun. Switzerland and the UK frezzed his assets, respectively at least the share the know about and have access to.

Todays RT´s article  “Defaulting on dictators: hunt for Gaddafi’s loot begins” draws on various credible sources to describe the stage of the hunt for Gaddafis money and where it is hidden. In total the wealth of the clan is estimated to go up to USD 80! billion, the majority squirreled away in Libya itself.  The liquid assets alone are estimated at about USD 20 billion. No bad for a revolutionary leader. Not surprisingly Switzerland and the United Kingdom are prime candidates as places where the money is stashed away. Certainly news of other Gaddafi investments and financial havens will continue to pop up.

Let´s hope this freak and his screwed-up family is gone soon, that a lot of money will get back to the people in Libya (and will put to good use) and that not only politicians, but also banks and wealth managers will learn their lessons on the risks of dealing with dictators. (See our research brief “What the Arab Revolution means for Wealth Managers“)

 

Reactions on Our New Research on Middle Eastern and African Offshore Assets

Friday, February 11th, 2011

Our new research brief What the Arab Revolution means for Private Banks and Wealth Managers has been published. So far we had a very friendly reception for this paper in the media around the world, including even a Nigerian newspaper. Here is a selection: Bloomberg, Wealth Briefing, Nigerian CompassBanking Business Review.

 

The Arab Revolution and What It Means for Private Banks

Friday, February 4th, 2011

Just want to let you know that we are working on a research paper on this topic which is due mid next week. So, stay tuned. If you are interested to receive the press release please sign-up here.

 

Let the Bankers Fail

Tuesday, April 27th, 2010

“The trouble with Wall Street isn’t that too many bankers get rich in the booms. The trouble, rather, is that too few get poor — really, suitably poor — in the busts. To the titans of finance go the upside. To we, the people, nowadays, goes the downside. How much better it would be if the bankers took the losses just as they do the profits”

In an editorial for the Washington Post James Grant captures the essence of what financial reform should be all about. I think the same principle should apply to private wealth managers. Why not have fee arrangements that reward an adviser for profitable strategies and make him pay for bad advice?

“The job before Congress is to bring the fear of God back to Wall Street. Not to stifle enterprise but quite the opposite: to restore real capitalism. By all means, let the bankers savor the sweets of their success. But let them, and their stockholders, pay dearly for their failures. Fair’s fair.”

 

Market: Trust Buffett More Than Obama

Monday, March 22nd, 2010

Bloomberg reports that it is safer to lend to Warren Buffett than to Barack Obama aka the US government:

“Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg.(…) Berkshire Hathaway’s 1.4 percent notes due February 2012 yielded 0.89 percent on March 18, 3.5 basis points, or 0.035 percentage point, less than Treasuries, composite prices compiled by Bloomberg show.”

When will Mr. Buffett announce his candidacy for president of the United States?

 

“For Nine Years I Was the S.E.C.’s Doormat”

Monday, March 1st, 2010

The New York Times Magazine has interviewed Harry Markopolos, an investment manager and math whizz who spent nine years to track the machinations of Bernie Maddoff’s hedge fund.  He concluded  early on that Madoff must be a fraud.  In November 2005 he sent a memo to SEC regulators titled  “The World’s Largest Hedge Fund  is a Fraud.” It described his suspicions about Madoff in more detail and asked the SEC to check his fraud theory.

In the NYT interview, Markopolos judgement of the SEC is a harsh one:

Q: “Why do you think the S.E.C. failed to wake up to Madoff’s $65 billion Ponzi scheme until he turned himself in?
A: “They weren’t even asleep at the switch; they were comatose. They didn’t respond to heat and light, much less evidence of wrongdoing. They were not engaged in the fight.”

The whole story is a great example how dysfunctional huge regulatory administrations have become in the financial industry. They are not even able to uncover a fraud scheme when someone else does the analysis for them.

Governments around the world are busy these days to develop grand schemes for new regulatory bodies and laws. No doubt, they will be even less functional. The dysfunctionality will most likely be proportional to the complexity of the law and the number of new bureaucrats hired.

Yet, ordinary investors should really take one learning from the Madoff story: Don’t trust the government to see the red flags and protect investors. It won’t happen. Or more precisely, it will happen but far too late. There is only one way for investors to protect themselves from fraudsters - do the critical analysis yourself,  and keep a very skeptical eye on the ocassional fund management Wunderkind.

 

The US hosts the No. 1 Offshore Centre

Thursday, November 5th, 2009

A recent study ranks the U.S. state Delaware as the place with the most secretive jurisdiction worldwide. Or how the Guardian puts it in more practical terms: “(…) Top of the pile, beating the British Virgin Islands, Belize or Liechtenstein as the best place to hide wealth, is Delaware”.

Already last June we have pointed on this mostly overlooked fact in the ongoing hypocritical discussion on offshore banking and the witch hunt on countries like Switzerland or Liechtenstein. Learning: If you start an offshore centre and do not want to be punished you better be a superpower or at least a G-7 member.

BTW: London (yes, the capital of the other main country going after offshore centres) is ranked as 5th most secretive jurisdiction worldwide.

 

UK Government Now Also Pressuring Overseas Offshore Centers

Thursday, October 29th, 2009

The Wall Street Journal reports:

“The U.K.’s myriad overseas territories and crown dependencies must improve standards on financial regulation and tax information-sharing and should broaden their tax base or face possible consequences, a U.K. treasury commissioned report said Thursday.”

This is just another indicator of how rapidly offhsore banking is losing ground on a global scale. The UK responds to complaints by Austria, Luxembourg, Switzerland and other offshore centers that the UK government is attacking foreign financial centers while protecting its own financial offshore centres overseas. This move will increase the pressure especially on Austria and Luxembourg to move towards automatic data exchange on bank clients who hide assets under the protection of the banking secret in Austria or Luxembourg.

 
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