Posts Tagged ‘Markets’

Too much Finance?

Posted: October 8, 2018 in Economics
Tags: ,

A worthwhile article found recently in the Independent

https://www.independent.co.uk/news/business/news/finance-curse-uk-economy-sector-city-of-london-loss-financial-services-a8571036.html

In the UK, the vast sums of money being created as banking, fund managers and other financial businesses boomed has created a brain drain that pulled people from other industries

Against perceived wisdom, this research under-covered here is a direct throwback to the free marketers who believe industrial policy should never be directed in any way by non market forces, and that deregulation should be embraced. If true, there are real consequences to following through with this logic……

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The profound concept of what value is and what value society should try to attain is explored in this worthy documentary.

I would like to highlight a number of the take home messages which I found to be praiseworthy and challenging of conventional wisdom;

  • ‘Not all profits are created equal’ implying certain gains could potentially be more worthy than others, the simple metric that something is profitable should not be an absolutist criterion. Profit should be based on sustainability not success
  • The components of the Value Chain should be continually assessed not for whether they are profitable but for what real value they provide the wider society, what positive aspects do they contribute?
  • Price, a key market signal, does not reflect the true cost to society or the environment, therefore how ‘profitable’ are certain activities
  • Our environment governs our behaviour therefore is there is any such thing as free choice, do we even have the freedom to make a choice?
  • The rewards we have currently have in a market economy incentivise us to make potentially harmful choices, not the beneficial choices
  • Contrast the theory that markets allows us to allocate resources adequately with the knowledge that this allocation may be to detrimental activities
  • Some say society at large has never been more prosperous nor peaceful, but the point of how fractured it is bears contemplating
  • The final scene where the following advice was given had much resonance with me, ‘…it’s time. Serve’ This could also be interpreted as in order to serve (society/the natural world order, and therefore establish justice to ourselves and others) we must SUBMIT…the basis of the concept of Islam

Consider this post in reference to the concept of derivatives.

I feel that if anyone wants to attempt any critique of the derivatives market in its entirety, one has to move past any continued emphasis on ‘casino capitalism’, as this is an oft repeated line which, whatever its merits or otherwise, has become an easy reply for those who favour such practices.

I believe one needs to concentrate on debunking the notion of risk management in order to effectively retort.

Many supporters of derivatives would rightly point to their use is not just to speculate with (as in Investment Banking), but as a valid means to manage risk, especially in Insurance, and it is this aspect which deserves further attention in my humble opinion

The above linked post brilliantly draws together the notion of colonising time as an integral commodity, matching any such physical asset, thereby shinning a much needed light on the important and neglected aspects of this discourse of, post colonialism and global racial financialisation.

It has been oft repeated that in our democratic, liberal societies, the few have greater power over the many

Is it the top 1% that owns a greater share of the capital and wealth than the remaining 99%? It is interesting to think of how many of these ‘many verses few’ statistics genuinely exist when analysing our reality

Given the freedom to own property and generate capital, which can indeed be a positive thing, to what extent is this so open to abuse that the rules of the game were never really meant to create fairness and a degree of equality? Is human nature, which is left unchecked, too prone to avarice that such freedoms will always result in a small elite hungry to capture ever more resources than required?

This is not another post looking to promote controlled economies,  however its purpose is to illustrate that, with the best of intensions, will some freedoms, when applied to a population shaped and conformed to behave in a certain manner, always result in a pyramidical structure taking shape where these conditions exist? Is this shape the overriding effect of all the freedoms at our disposal? Consider the following;

Top Asset Management firms by total value of assets under management

Think about what this data is actually telling us; when asset managers acquire equity, or interest in another business enterprise, they take a degree of ownership in that firm. Thereby, over time and because of the funds that flow to these giant institutions, the few in combination, have ended up in a position of ‘owning’ in part or in full, the many corporations that they have a share in – allowing them to ascend to the top of the pyramid; the few owning much greater proportion combined than the many. It also follows that this leads to a common source of control and influence across an economy/region given this limited pool of effective ownership.

Another perspective on this could be that much of this capital originates from the mass population who are the ultimate owners, through their long term savings and pension provisions invested with these providers. Therefore, is this an attempt to invert the structure, allowing the many to benefit? I would argue not, the masses, when considered individually, on average, do not financially benefit as much as the managers who take material cuts from the pool of funds at their disposal. Often their reward incentives are not adequately aligned with the retail investors at large, allowing the elite to become disproportionally better off than the investors who are searching for gains. The small investor is also not the party which excercises the controlling power.

In addition to this asset ownership, consider more generally, how much land the few own in comparison to the larger population, the size of GDP of the few regions compared to the many, the distribution of resources, the access to what is classed as the best quality of education, the trend continues and the structure that we can continually see forming is that of a top down, hierarchical pyramid – it should be clear from such insights what the ultimate power structure of the contemporary world is and what the fruits of everybody’s efforts are really delivering.

 

 

By following the money trail it is possible to  discover how intertwined British Imperialism was with its emergence as an economic power and the prosperity created for the nation.

Please read the following eight short pieces by James Walvin, on the monuments and show pieces across Britain and the people behind them, all connected to various trades directly linked to Slavery.

I will continue to explore this topic in a number of posts in future under a similar title

As the new calendar year opens and the prior year draws to a close, many media slots are filled with both reviews of the past 12 months and predictions for the coming period.

In a year which has shattered any pretence, if there was indeed any in the first place, that certain qualified professionals have an innate ability to understand and predict future events and trends more so than those not so versed, I find it bewildering how the routine of setting predications continues apace.

Yet, nothings changes with the time and space given to these commentators. Does this suggest that we are simply suffering the fall out of the media’s own making?

Does it become a necessary exercise in futility that cannot be undone. People are paid to ply their trade, plenty of investors hoping to be the early bird yearn for such opinion, however what fundamentals change with the ticking of the clock past midnight on the 31st of December….none. Events occur at various moments, they may be game changers, or just another part of an ongoing trend, but until such time, why do many of us become caught up, entangled, in the futility of reviewing for only the sake of review? Until material events take place, should the consensus be the same from one small moment to the next?

With the amount of opinions available, getting the right outcome then becomes a sure fire way to earn a name for yourself…and then ensure others listen to you the next time. It will also set yourself apart from others and thus raise your status even further, allowing one to earn a greater share of the pie.

But the emphasis seems to be to write for the sake of writing, to pick winners or make new observations, not because anything has changed, but because of the need to make a statement, an observation or raise an issue not already discussed. Because the machine is too bloated and it needs more junk to feed on, many are only too pleased to oblige, and before we know it, we don’t have quality research on the market, we have noise. Distracting garbage probably not worth the paper its written on, something to separate the herd from the those with an eagle eye.

No-one can be right all the time, and no-one can rightly claim to know more than their peers. And yet in a year such as 2016 when eggs have been freely spread over the faces of our esteemed experts no such change is thought to be appropriate this time around.

Sometimes, less is needed, not more. Sometimes no comments are more insightful than the need to fill a void, to sell more observations to the detriment of the ordinary investor. I find a great connection here to the fact that even in an information age, with so much growing information at the tips of our fingers, we are arguably becoming ever more ignorant, being drowned in distraction not clarity. Look at the clamour of reporters trying to decipher from the tiniest inferences from Central Bank Governors as to the perceived direction of rates and the economy….there is just too much at stake not to be overzealous in this regard.

Will we think back to the remarkable number of events throughout modern history when the herd were quite disastrously wrong (EU Single Currency argument ?), or is this too just many people buying the trash up for sale. Perhaps we have never been accurate at all but the blurred reality shown to us is one that most experts get it right… mostly, but who’s really keeping check?

I wonder how the future will pan out…..let me see what those in the know are saying….?

 

 

 

In 1985 a precedent was set, as the leading economies of the day met to agree a way forward for mutual benefit and growth.

Read a summary of the event here

Putting this into perspective, considering modern day interventions, which has become a little too coordinated and frequent. Ultimately the Central bankers continue to take center stage, markets can’t get enough of them. They pour over every word, the syntax and the general impression they give about the coming months, are they feeling too hot or too cold, bull-shit or bear-shit?

These are the puppet masters, managing the stage, setting the scene.

Another example of the manipulation and authoritarian control excercised over our economic reality