restoration

Oct 19 2008

free or fair

I don’t have a lot of time for a certain George W. Bush and I’m sure I’m not the only one who suspects that he actually hasn’t got a clue what is going on in the financial markets. Everything he says sounds like it is being fed to him by someone who knows the headlines, but that’s all it is.

However, something he said last night has caught my eye on the Beeb. This is in the context of a meeting held with President Sarkozy of France and Jose-Manuel Baroso, head honcho of the EU, in which they announced that they will be having more meetings about the global financial crisis. First of all, Sarkozy said:

“….[the world could not] continue to run the economy of the 21st Century with instruments of the economy of the 20th Century.”

Following on, this is what caught my eye from Bush:

“It is essential that we preserve the foundations of democratic capitalism – a commitment to free markets, free enterprise and free trade.”

Consider this – if we substitute the word “fair” for the word “free”, it begins to sound like a commitment to sociacapitalism: fair markets, fair enterprise and fair trade.

Oct 18 2008

2 Comments

banks, work

so is it working?

Last Monday morning, we all woke up to the news that the UK Government had put its rescue plan for our large banks into action. Subject to an unlikely, although possible, take up of the equity issues in HBOS, Lloyds TSB and RBS by existing shareholders, we will all own part of them – up to 43.5% in the enlarged Lloyds Halifax Bank of TSB Scotland, and 60% in RBS.

At the same time, the authorities are enhancing their already considerable liquity support, by extending the Special Liquidity Scheme and offering up to £200bn in guarantees for bank issues of debt.

Combined, these two strands of the plan were aimed at providing confidence in our (for they now belong to all of us, at least in part) banks and allow the flow of credit around the banking system to recommence. Crucially, the Government is looking for that restarted flow of credit to also lead to increased availability of debt for home-owners and small businesses, in an attempt to avoid a severe recession. We are going to have a recession, it’s just a question of how bad it will be.

So, has anything changed? Well, I am going to sit on a fence and say yes and no. First and foremost, a large element of fear has been removed, that previously surrounded our banking system. It is clear that the Government has no intention of allowing a large UK bank to go down – Northern Rock and Bradford & Bingley shareholders may wince at this point – and will continue to everything they can to prevent this while there is still worth in UK plc. If we ever reach the point at which the country is bankrupt, I’d be more concerned about sharpening up my agricultural skills than mooning over the vanished value of investments.

This fear has also, crucially, been removed within the banks. Executives and staff alike now have a far clearer idea of what is required in the next couple of years, the uncertainty of the last few months has been removed, though we are resigned to our “total reward” packages being diminished for a while to come. We are not all going to be as hyper-motivated as the last few years – that is simply a human reaction – but the mere fact of still having a job is a powerful stimuli.

However, as yet, the flow of credit around the banking system – the wholesale markets you will have heard about – has not returned to anything like normality. It is only when this starts to happen, and banks begin to move from utter reliance on the public resources, that credit availability to the areas identified by the Government will be properly restored. This is still, obviously, an issue due to the stubbornness of three-month LIBOR rates to budge much.

LIBOR is the rate at which the banks lend to each other, providing a fundamental indicator of their willingness to do so. Since central banks around the globe made a co-ordinated cut on 8th October, three-month LIBOR, the variation which is the cornerstone of the wholesale markets, has moved down a little bit, but resolutely remains considerably above 6%. Given that Bank of England Repo Rate (or Base Rate, as it’s otherwise known) is 4.5%, this shows that the banks are charging an incredibly premium for lending to each other.

Why is this an issue when the Government has effectively guaranteed liquidity to our banks? The answer is that the wholesale markets are not wholly between our banks. In fact, the main UK banks are combined net borrowers on the markets, meaning that the cash must be coming from somewhere else. That mystery source is actually two-fold: non-bank UK financial institutions and overseas investors and financial institutions. The former is not a source that could recover in the short-term as a lot of these UK institutions will most likely be keeping their cash close to home until the recessionary ramifications are clear.

The overseas sources of cash, therefore, would seem to be key to restarting our wholesale markets. This has not happened yet because the full international efforts to resolve the gridlock have not worked their way through the system. While I am reticent to give Gordon Brown too much credit, given that it is arguable that a lot of the particular problems our banking system has encountered are of his doing, it is important to remember that the action taken by the UK government was in effect pioneering. Put it this way, the particular way our plan has been structured is being broadly followed by other governments.

Therefore, while we think we have “solved” our problems, we must bear in mind that our financial system does not sit in isolation to the rest of the globe and, while other rescue plans are being put in place, we cannot expect normality to immediately return. The breakdown that occurred last year, which ultimately lead to the credit crunch, spread rapidly via the massively inter-linked global financial markets. The co-ordinated international solution cannot quickly reverse the damage, particularly as the spillover to the “real” economy has now reached the point of no return.

Recovery is beginning, but ultimately, we can write off the rest of 2008 and most of 2009 before that actually turns into some good news stories. In the meantime, we need to continue the conversation about how banking will look for the years to come.

Oct 15 2008

1 Comment

australia, blogging, God

16 days and counting

I am about to have 16 Christmas Eve’s in a row, each day notching up my levels of hyper excitement one step further. On 31st October, scheduled at 7.15pm, I will be on board a BA flight to London Heathrow. My long-dreamed of Australian expedition will have begun. Following an overnight at one of the hotels near Heathrow, I will board Singapore Airlines flight 317, bound for Melbourne after a brief stop in Singapore.

Since I started university in 1993, I have enjoyed approximately 3 weeks in total of what could properly be described as holiday. For all but three calendar years since my first trip in 1997 (1998, 2000, 2004), I have made a trip to East Africa, following my heart (and my Lord’s desire) to get know the people, the culture, the land and the faith of that region. Yes, the odd short safari has snuck into my schedule, but holiday in the classic sense, it is not.

When I returned from my last trip, in September 2007, I strongly felt that 2008 was to be a fallow year in my African adventures. A chance to recoup and recharge, with a view to potentially taking my parents out to Uganda in 2009, though that is now unlikely. Of course, I wasn’t to know that this year was to be so professionally challenging and, in retrospect, I realise that (1) there is no way I could have devoted enough energy to planning an Africa trip, and (2) that a month in the Australian sunshine would be exactly what I needed when November comes around.

After booking my flights at Easter, I did neglect my preparations somewhat, only beginning to get properly organised recently. A plethora of internal travel has been sorted, as well as a nice hotel for the first stop of my trip in Melbourne – despite the trouble with not realising that the Melbourne Cup would be on at the same time.

From my arrival in Melbourne on the evening of 2nd November, where Ian will be joining me, I will go onto see my old friends David & Jennifer Read and their five children in Wagga Wagga for a couple of nights. I haven’t seen them since 1990, when they left Edinburgh holding tightly to newborn, first son James. Then its onto Sydney and, I think, Ian’s house-sitting place on the beach.

Sydney will possibly lead to Newcastle, where Stuart (a friend I went to school with) and his partner Brad are now located. But that’s all a bit confusing at the moment, because I’ve actually got a flight booked from Sydney to Brisbane on the 15th. And Brisbane = a short but loud bundle of Aussie fun. Otherwise known as Natasha. Then it’s up the coast to Townsville to see Anne & Bernie, and finally onto to Cairns where Jaq and her brood now reside. This last stop is a very pleasant surprise, facilitated by their move from Perth earlier this year!

So, that’s what a year of anticipation will lead to. I may take a few photos, so prepare to be bored rigid by them at some stage. My hope is to write as I go around, but that depends on whether I can actually figure out availability of the Aussie wi-fi system.

Oct 13 2008

6 Comments

banks, God, sociacapitalism, work

sociacapitalism

Confessions first. I am one of those high-flying corporate bankers who’ve done reasonably well out of the boom times. There have been deals I’ve done, and deals I haven’t done, all in the property sector. Since I took up my current role 2.5 years ago, giving me the opportunity to influence the structure and content of transactions, I have been involved in a number of complex and high-value deals. Not one of them I regret, in fact, there’s one I continue to be extremely proud of and it will bring huge economic benefit in a particular place for a number of years to come.

I’ve worked hard and, so far as I am concerned, I’ve earned my rewards. What I did for my employer was not some of the scary, highly-leveraged stuff you might have read about recently. I’ve gone about my business in a manner that adheres closely to the Biblical morality I ascribe to – though nobody is perfect.

As I said, I don’t have any regrets about the business I’ve been involved with, despite everything else said about this sector. At this time, however, life is difficult. The credit crunch and wider economic circumstances mean that people like me are going to spend a lot of time taking care of leveraged situations. This will not be news to anyone. It’s going to be stressful and I don’t expect to see the light at the end of the tunnel (taking care to ensure it’s not an oncoming train) for a good while yet.

Today’s news should means that the critical stresses in the financial system will ease in the short- to medium-term. It is unlikely to mean that we will avoid a recession in the UK and certainly will not stop the global economy going backwards for a while. At this moment in time, however, it should get things going again and the bank’s involved have undertaken to return mortgages and small-business lending to 2007 levels – whatever that is – which should, and I repeat should, halt the steep decline in the housing market.

That’s basic economics – there is still massive latent demand for housing in the UK and, given the number of housebuilding sites that have ground to a halt in the last 6 months, a likely substantial shortage of product coming forward in the next 2 years – simple supply and demand theory. Personally, I don’t foresee a sharp recovery given that the credit crunch is now having substantial impact in the real economy – the time lag is running at about 6 months.

The upshot of the current situation is that the bank that will be created out of my employers, and the employers of one of my best mates, will be approximately 40% owned by the UK Government. By translation, owned by you and I, as taxpayers, due to our effective ownership of the machinery of government. This has stopped the rot now, but rather than discuss how we got here and why this is the best course of action, I am much more interested in considering what this means for the UK financial system, and banking in particular. I should add, for the avoidance of doubt, that I will not (cannot) enter into any debate that criticises the actions of my employer or its peers

What is clear to me is that we entering an incredible new era, one that has metamorphed from the last one in an amazingly short period of time. The banks have been recapitalised in order to protect the health of the wider UK economy and, by extension, to ensure that taxes continue to flow into HM Treasury. This will, in turn, continue to provide public infrastructure and the necessary altruistic services – health, education etc. Banking will function for the good of the many, rather than purely for the benefit of shareholders.

One of the terms of the deal is that, while the preference shares owned by the state – £5bn in RBS, £4bn in the combined Lloyds/HBOS group – are outsanding, no cash dividends can be paid to ordinary shareholders. In effect, any remaining shareholders will have to take a minimum 5-year view, which is when the prefs are due to be repaid. This type of constraint will see the banks work to a public agenda for this period, and possibly longer given that the government will own substantial ordinary equity as well.

However, in order for this to work, for the banking system to restore the flow of credit and public income-stream, needs the individuals working in the sector to be allowed to employ their residual entrepreneurial flair. They will need to know that, in that medium-term horizon, there will be rewards for them. Executive bonuses are being encouraged, mandated if anyone oversteps the line, to be paid in shares. This will provide motivation to the people that the country needs to retain, rather than follow the money train east.

To this end, I believe we could entering into a new form of capitalism. Given that the death of Thatcherite economics has been called, this is a strain of capitalism that is strongly influenced to “do good”. I am calling this sociacapitalism, though that this is a bit clunky and I’m open to other suggestions.

This is a conversation I want to start and I’m not sure where it’s going to go. Banking is fundamentally changing and I want to be in on it. My own thoughts and aspirations for the new era are necessarily going to be informed by my faith, but I am intrigued as to how other people see the new settlement working out. Start talking….I’ll be back again soon.

This does not represent the views, published or unpublished, of …….ach, you know the rest.

Oct 07 2008

1 Comment

australia

for the avoidance of doubt part two

I am still planning on going to Australia in 24 days time. Would go tomorrow if I could, to be precise.

Oct 07 2008

Leave a comment

banks, shares, work

for the avoidance of doubt

The big banks are all still around.

My take on today’s events is quite simple. Rumour goes around the markets that three banks (RBS, Barclays, the soon-to-be-divine Lloyds TSB – the latter presumably also acting on behalf of my employer) have a meeting with the Chancellor to sort of gee him up a bit with getting his rescue plan for the financial sector out in the open in order to calm market turmoil. Said rumour, which is probably true (because Robert said so), causes more market turmoil.

“Why?” I hear you call. This is because professional investors are concerned that, if the rescue plan involves UK plc buying stakes in the banks in exchange for some capital and access to virtually unlimited liquidity, the value of their own stakes will be substantially diluted. In addition, you and I – in our guise as the taxpayer – will get a preferential return. In other words, first dibs on the profits.

This ignores the fact, for the moment, that it’s also the small (compared to the professional) investor who is losing out. Like many current and former bank employers – just the normal guys who slave over a laptop from early in the morning until late at night – have seen the value of their own eggs-in-one-basket investments go south. And that includes me, of course.

FWIW, my view is that the government will in turn seek to privatise the public’s stakes in the banks in due course, but this is a fair way down the road. In the interim, a suitable return will need to be provided for the risk the taxpayer is taking. If David Cameron’s Thatcher-lite version of the Tories get into power in 2010, then I think this is likely to happen during the course of the next parliament, assuming that the markets return to some semblance of normality.

Also for the avoidance of doubt, I should probably that my views do not represent the views of my employer nor any other employee of said employer. It’s just little me, spraffing on a bit about, you know, money and stuff.

Sep 18 2008

4 Comments

work

thank you

Unless you’ve just returned from a lengthy expedition to a land where mobile phones get no signal, the internet is still a twinkle-eyed futuristic dream and the only TV you get is a fuzzy version of ITV (or the Scottish Highlands as it’s otherwise known), then you may have gathered that the last few days have been unprecedented in history. The world’s financial system has creaked in a way not seen since the Great Depression, something accentuated by the overarching globalisation we all have an antagonistic/apathetic love/hate relationship with.

And my employer has been right in the middle of it. All in all, not a very pleasant few days.

I am not going to comment about the hows, whys, whats and who’s of the takeover. Some of my views will no doubt come with the tagline “these do not represent the opinion of xxxx plc”. However, on Tuesday evening I had resolved to be positive on Wednesday morning, to try and show a bit of leadership to my team, attempt to get the morale off the floor. This all disappeared fairly quickly as our share price seemed to take its final dive into oblivion.

What happened next has been very well reported and I do not know any more than has been plastered all over the news channels and websites. Really, I don’t. In fact, Robert Peston of the BBC probably knows far more than I ever will – or so it appears from his very accurate and timely reporting. There is now a sense of substantial relief in my office, along with a developing uncertainty as to what it will all mean. Who knows, I certainly don’t.

All I want to say, though, is thank you. In this difficult and scary time, I’ve had so many messages from so many different friends, offering support and encouragement to me and, by implication, to my colleagues. It’s been really great and I’ve been overwhelmed. If I forget to say it to you individually, here it is – thank you.

Jul 05 2008

2 Comments

biking, stupidity

a spare set

Of legs would be very handy right now.

I’m doing this charity biking thing in September, the Cairngorm Mountain Bike Challenge. Its my employer’s annual charidee shindig, well its now annual insofar as this is the second year in a row. Due to the imbibement of gin on an empty stomach, I talked myself into doing it back in front on my head of department. Yes, its true, I am stupid.

Training commenced in earnest at the end of May, with a couple of trips down to Glentress to have some fun on the trails there. Two things became obvious very quickly: (1) climbing hills on a bike is very hard; and (2) coming down them on a bike is a huge amount of fun.

Since then I’ve been trying to “get some miles in my legs”. I’ve managed to get out most weekends and this morning managed to do 22 miles. From my flat, up to Balerno, over the hills to Glencorse. Back over the hills to Currie, then home. This is the most exertion I’ve done in years. And this single act of exercise has pretty much ruled out all the other things I was going to do this weekend.

Why? Quite simply because my legs aren’t functioning. Has anyone got a spare set I could borrow?

Jun 24 2008

Leave a comment

church, jesus, music, uganda

vision jealousy thing

Don’t you just hate it when someone does something with your idea?

My friend David and I have spent many long hours – usually accompanied with beer, whisky and cigars – pondering on how we could make our fortune. This pastime was a little more common when we were students (poor and idle) than we are now (less poor and very busy), but we did occasionally strike on the odd good idea. I seem to recall coming up with the idea of a mobile internet device for downloading music at one point. David was the engineer, could actually build stuff; whereas I would be in charge of marketing, sales, finance, that kind of stuff. Millions would surely start rolling in.

The abiding feeling I always had after these conversations was that (a) we would never get around it; and (b) someone else is likely to have had the same idea and will take all our money. I would suspect both of these things are true, but I’m in the middle of experiencing a similar feeling about a few of the things God has given me vision for over the year.

Example: I remember sitting with the man who can only be known as “Crazy Pete” at a party once and talking about the idea of having some big Christian music event in Scotland. Get all the churches behind it; have loads of people worshipping; change the city/nation/world. That kind of thing. We even came up with a rough budget (£750,000 if you must know) and promptly didn’t do a single thing about it.

Then the boys in Dunfermline came up with the whole Frenzy idea. A brilliant event that brings so many people together. It introduced to the awesomeness that is David Crowder and I’ve had some cracking worship and Jesus experiences there. The guys had the vision and acted on it. My emotions went something like:

Brilliant

I want to go

Didn’t I have that idea?

How dare they steal it!

I’m still going.

Why can’t I act on vision?

Or does God have a better one?

Tonight, I’ve been reading some of the blogs about the Passion event in Kampala and getting a similar run of emotions. Even any casual reader probably knows I’ve got a bit of a thing about Uganda, something I strongly believe that God gave me back in 1997 and shows no sign of going away. I was already feeling a bit sensitive about this, as some folks from church are just back from a shortish trip to the awesome Soroti and my mind had started turning to planning a trip next year.

One of my strong passions for the church in Uganda is to trip and help unlock the awesome worship that is stored in these people. Through adversity, they still have the most glorious faith and it continues to be a real challenge to me, who will find struggle in the most insignificant travail. From time to time, I’ve wondered about the idea of getting some of the great songwriters of our time to maybe pop out with me. There was an unwritten email to Martin Smith of Delirious after a piece he wrote about a trip to Rwanda. Several thought about comments on David Crowder’s blog. Those kind of things. I wasn’t thinking of like a huge event or anything, just a way to further encourage that spirit of worship.

Then the Passion folks just went and did it. OK, so they might have had a hand – I understand that Kampala Pentecostal Church, the largest church in Uganda, was involved in the organisation – but the fact remains that they answered God’s call. I kind of pottered along, waiting for things to fall into place for my vision, rather than actually doing something about it.

The moral of this story, or at least one version of it? When God gives you a vision for something, get on with it, or He’ll find someone else to do it instead. The alternate ending to the tale involves Him providing a bigger/tougher vision, after being inspired by what others have done in faith, but I’m not sure anyone should be relying on that. Do you?

Jun 20 2008

Leave a comment

guitars, jesus, music

baby’s first loops

Everyone knows I’ve been investing a little in my guitar rig recently. This is only really part of my determination to get back into being musically creative, recognising that I’ve written very little in the last couple of years. So, I’ve finally got around to getting a little piece of musical software (only the lite version) and a small midi keyboard.

Now, I can’t pretend that I’m much good at it yet. What I’m trying to produce is little scene-setting loops. Just a brief idea or so, a few bars. Something I can come back to later. There’s so much more to the software, and I’ll never understand it all.

Here they are. Let me know what you think.

Obviously, all (c) matthewrestored 2008, just in case they are good and somebody wants to steal them.