Rather a lot of money

8 min read

It might be the silly season but some things are more silly than others. The Pink’un’s headline this morning, as the earnings season draws to a close, is that “FTSE 100 chiefs hit with £1m pay cuts after outcry”.

Mr. Neymar

That’s a lot of money in anybody’s book although, just as a passing thought, the aggregated pay cuts wouldn’t make up much more than half of the €222m cost of a 25-year-old Brazilian footballer by the name of Neymar for whom the Qatari owners of Paris Saint-Germain are close to paying FC Barcelona as a transfer fee, before salary and benefits.

I’m not sure what Mr. Neymar’s contribution to either Brazil’s, Spain’s or France’s GDP has been or is going to be, how many jobs this investment is going to create or maintain, how many medical procedures will be financed by his income tax payments or what the differential will be within Paris Saint-Germain between the highest and the lowest paid employee but I’m sure Young Macron and his merry men will have a keen eye on the issue and will make sure that the right thing is done.

€222m is over a quarter of a billion dollars. We’re not even allowed to take a client out for dinner any longer for fear of creating crookedness while football clubs are spunking away hundreds of millions on kids whose sole skill is that they can kick a ball. It was the inimitable and hugely courageous and very quotable English motorcycle racer Guy Martin who said “I have nothing against football… just seems very wasteful losing two hours of my life to watch 22 millionaires on TV chasing a bag full of wind in their underwear”. On the basis of a five-year contract Mr. Neymar will cost his club, before they have paid him his salary or any kind of bonuses, €121,643 and change per day, irrespective of what day of the week it is or whether he is playing or training or not.

I understand the concept of panem et circenses but isn’t this taking opium of the masses a step too far?

London calling

Back to London where I spent a very enjoyable day yesterday meeting old bond dogs, young blockchain entrepreneurs and one stalwart mainstream financial journalist. Although the latter wanted to see me in the context of his digging around in the murky past of the bond markets as he pursues a story which, should he ever get to the bottom of and should he ever be able to tie the many strands together, will make “Wall Street” look like a Disney cartoon plot. It has all the bits with hundreds of millions of dollars of never mentioned losses, people dropping off the map and even, possibly, the odd corpse. And yet, the story is never spoken of. He wondered why this can happen and why there have been no charges filed and prosecutions brought. The answer is simple: admitting to the events would do nothing other than prove that the billions spent on beefing up systems and hiring thousands, if not tens of thousands, of oversight and compliance officers has done nothing other than make life nigh-on impossible for right thinking and hardworking bank staff while doing absolutely bugger all when it comes to keeping out the rotten apples.

It was pointed out, for example, that market manipulation by first shorting an equity and then buying the living day-lights out of CDS protection for the same name could never, ever be picked up by the authorities for one part of the trade takes place in the stock market and the other in the credit space. The causal link between the two simply cannot be created. The more we talked, the clearer it became that the regulators, irrespective of geography, are looking ever less like El Cid and ever more like Don Quixote.

As ever when talking to serious City folk today, the subject of blockchain is never far away. My tame journo simply looked up and said more rhetorically than quizzically “This is the big game changer, isn’t it?”. The iPhone and Tesla are in front of us all the time so we can see change happening but blockchain isn’t. The most common of the sceptic’s responses is “I don’t want to get involved in it until I fully understand it…” to which the geek’s reply tends to run along the lines of “Well, I’m sure you don’t know exactly how your mobile phone works but that doesn’t prevent you from using it does it?”.

Small change

The split in bitcoin has now taken place and “Bitcoin Cash” is being freely traded. The jury is out whether Bitcoin Cash, quoted last night at 17% of bitcoin, is headed for parity or for zero. There is a Wild West sense about cryptocurrencies and some will not make it to the end of the Oregon Trail but for those who do, the rewards could be significant. Amazon, after all, was once just another of those dodgy dotcom stocks. Even Warren Buffet started out in 1964 by begging local friends for US$1,000 investments. Today, 50-odd years on, those US$1,000 would be worth knocking on US$20m. Trading cryptos isn’t for the faint hearted but it has to be more fun than buying Bunds at 0.49% yield, which goes into negative total return if yields rise by as little as 5bp.

It must be what it felt like in the 16th century to have shipped out of Lisbon, or Cadiz or Portsmouth or Bordeaux with the compass facing west.

Meanwhile, need I mention it, the Dow made another all-time high, closing at 22,016.24. That said, the year-to-date performance of that index if converted into euros still remains negative, albeit only by 0.2%. Euro/dollar is now at US$1.1850. This also reflects back into gold which, in euros, is at €1,065.72/oz which is close to the recent low of July 11 at €1,061.83. Go through that and you have to go back as far as February 2016 for the next closest low close. The weak dollar is doing much to distort prices across the asset spectrum and all the hollering and whistling and popping of champagne corks on the floor of the NYSE isn’t going to change that. Some rum TV commentator had it this morning that this is the first time in the 121-year history of the DJIA that it has closed above 22,000. Well, if it is an all-time high, that kind of figures. In fact, it’s the first time since Adam was a boy that it has closed above 22,000. How stupid can you get?

Markets remain broadly thin and quiet; let’s see what tomorrow’s US payroll report has to add by way of spice…