British, or more accurately, English news channels, in as much as they have done with dealing with the death of Israel’s towering political leader, Shimon Perez, are today taken over by the news of the resignation of England football manager Sam Allardyce after 67 days in the job.
He leaves with a 100% record having won his only match in charge. The scandal surrounding the £3m per year coach blew up in just one day after it had been revealed that he had accepted an offer of £400,000 in order to canvas on behalf of some putative Asian investors and also offered the benefit of his experience in breaching formal transfer rules. That “fairyball” is corrupt to the core barely comes as a surprise but what shook me was the reaction by Joe Public in a radio phone-in during which the vast majority of callers saw nothing wrong with his behaviour and one particular caller insisted that he expected the club he supports to do whatever it takes to secure the best players and sod the bloody rules.
As my dearly beloved, late mother used to say, “money doesn’t smell but too much money stinks…” I wonder how the world would react if a bank shareholder openly suggested that, in the pursuit of success, he didn’t care either whether the bank’s executives also decided to sod the bloody rules. And now to the point: The Football Association and Sam Allardyce have the residual honour to agree that the situation is untenable and that he has to go.
Meanwhile John Stumpf of Wells Fargo hands back US$41m in bonuses, which anyhow were still only in his deferred compensation package, and hunkers down. How, for God’s sake, can he not have either fallen on his sword or been dropped onto it by his board of directors? It seems that the tens of thousands of compliance and control staff who have made life a total misery for hard working executives have, other than costing an arm and a leg, achieved nothing. If standards of behaviour and admission of responsibility in banking have fallen below those of association football, then we might as well give up and start farming chickens.
Meanwhile, the Royal Bank of Scotland agrees to pay US$1.1bn in fines for mortgage mis-selling in the US while waiting to see what the DoJ – that’s the guys who are trying to impose a fine on Deutsche Bank that is very close to its market cap – have in store for it. If DB with a market cap of €14bn is supposed to pay US$14bn in fines, what could Wells be in for with a market cap of US$227.5bn in response to misbehaviour which makes the mortgage thing look wholly innocent? The mortgage thing was built on greed – both on the side of sellers and buyers – and stupidity. The faked opening of bank accounts is one-sided and plainly criminal. I would love to see whether Wells opened any dodgy accounts for European citizens and residents and if so – one single one would do – I’d be delighted to see the ECB throw the book at them. Maybe the EU could get a Yank bank to fund its deficit in the way the Yanks have been doing it with the European institutions for years.
C’mon O’Bama – isn’t it time for you to “keep our boot on the neck” of Wells Fargo?
Yes, I know this is frivolous thinking but so what? It’s nowhere near as frivolous as that of the Wells board or of the fans of football.
Beware Greeks
Meanwhile, back in the real world, Greece’s PM Alexis Tsipras has succeeded in pushing the next reform package through parliament which will secure a €2.8bn disbursement of bail-out funds. Other than applying make-up to the face of a corpse, the reforms are meaningless. Cutting pensions yet again might look good in accountancy terms but beyond that they do nothing other than to draw even more money out of the already deeply recessionary economy.
I agree with all those who plead that austerity is making things worse, not better, but that is where common ground ends. Greece, a country which I first visited in 1965 and of which I am very fond, is being strangled by its link to the euro. The refusal by Brussels to grant it a divorce in 2010 was sweetened by the promise of many gifts. The gifts have nominally kept the marriage alive but they have neither restored trust nor happiness. Been there, seen it, done it, got the receipts to prove it…
The relative stability of Greek 10-year yields over the past months – they stand today at 8.37% against a six-month average of 8.17% - could be deceptive. Markets seem comfortable with the opinion that the eurozone has too many other, more pressing problems and that it will do whatever it must in order to keep a cap on Greek volatility. That cannot detract from the issue of 52% of bank loans being in what used to be known as the “bad or doubtful debt” category. Germany has a banking crisis of its own and the hope that help might come from that direction can now be shelved.
Europe is slowing as the ECB’s stimulus efforts to kick-start the economy begin to falter – I have no doubt that said situation will be centre-stage in the closed meeting between St Mario and German lawmakers today – and the air of optimism is also fading. French unemployment figures, released on Monday at 3,556,800 were unexpectedly ugly and with Italy struggling with its banking crisis, the bloc’s tolerance for a log-jammed Greece might easily come back into focus. At 837bp over Bunds, I can’t see market confidence that Greece is an improving story. If it isn’t getting better, it can’t be long before it gets worse again.
Finally the “Hillary bounce” – I’m not sure it ever existed anywhere other than in the eyes of the financial press which yesterday morning saw a rally in Asia and in the debate found a convenient reason for risk to rally. Today it’s all been given back again. Don’t hold your breath; for the next six weeks every cough or sputter in markets will be traced back to US opinion polls. It’s half a lifetime ago that I discovered that the thing to do is to always trade against moves in markets brought on by political events. They never last for long. Stick to your fundamental views and use political swings as buying or selling opportunities, respectively…