Hitting the Surf

Just had a stonking 5 days in Cornwall, mainly sampling the seafood and some hugely generous hospitality on the Helford River. But on Sunday we crossed to the north coast for lunch at the Godrevy Café on Godrevy Beach, followed by a fabulous 2 hour surf lesson with Shore Surf School. It's been over 30 years since I last played around on a board (white polystyrene from Kentucky Fried Chicken, as I recall), but I managed to get to my knees half a dozen times and to my feet once during the session. I'll definitely be back...

Music To My Ears

"Music has always been a matter of energy to me, a question of Fuel. Sentimental people call it Inspiration, but what they really mean is Fuel. I have always needed fuel. I am a serious consumer. On some nights I still believe that a car with the gas needle on empty can run about fifty more miles if you have the right music very loud on the radio." (Hunter S. Thompson, Kingdom of Fear)

Here are a few short playlists I'll be updating. You'll need to create and log-in to your own Spotify account to play them.

General:

http://open.spotify.com/user/sdjohns/playlist/6OHa58YlOVwHX61LyxrSgO

Blues:

http://open.spotify.com/user/sdjohns/playlist/18gCxm6JjY6Vq1QkiwWTgO

Acid Jazz:

http://open.spotify.com/user/sdjohns/playlist/5nluXO9035KNAicyxg2iD3

Everything's Amazing, Nobody's Happy

While it's of course vital that we identify and solve our real problems, it's worth keeping a little perspective...

Fool's Gold, Fool's Paradise

I've literally just finished Gillian Tett's Fool's Gold, an insightful, frank and highly readable account of the credit crunch, explained from the standpoint of the JP Morgan staff who somewhat unwittingly unleashed the Bistro-style CDS derivative into an environment of such stunning irrational exhuberance, greed, negligence, recklessness and downright fraud that it's left even the insiders angered and aghast.

And it ain't over yet. While subprime default estimates continue to be revised upwards, bankers brazenly continue to repackage downgraded debt into yet more CDO's backed by leveraged loans.

Importantly, Gillian Tett's narrative tellingly confirms a string of cultural problems that we're told again and again abound in the capital markets trading "pit": regulators whose remit and resources prevent them seeing the financial world holistically, a commission/bonus-driven sales mentality that often ignores the limits of the hallowed Gaussian 'models', banking groups that merely comprise dysfunctional silos, the cosy social contract banks enjoy with government. It's little wonder that everyone lost sight of the big picture - and that our faith in these institutions is utterly shattered.

Yet none of these factors is about to change. Amidst all the talk and shuffling of deckchairs little is actually being done to avoid or minimise exposure to Black Swan events. Hedge funds scramble to avoid the sunlight, like the swaps world did previously, and the quest for transparency has degenerated into protectionist farce. With an election still a long way off, competing government and opposition plans for the financial sector realistically mean regulatory paralysis throughout the time when structural and cultural reform would have been most achievable.

We're living in a fool's paradise. Enjoy.

Bank Lending To Remain Partially Self-regulated!

From 1 November 2009, banks will relinquish their self-regulatory control over deposit, savings and payments products. That's when the FSA (doomed, say the Tories) takes over from the self-regulatory club known as the Banking Code Standards Board, and we are led to believe we'll get some retail banking regulatory protection with teeth. Banks will be obliged - on pain of fines - to "treat customers fairly", amongst other things, which ought to raise some eyebrows.

However! The good ol' BCSB will not crawl away to die.

Instead, it is to be renamed the "Lending Standards Board" in honour of its role "to provide continued monitoring and enforcement of lending and credit card standards, including those governing the treatment of customers in financial difficulties."

So the same club of banks are to retain self-regulation of lending and credit standards who virtually drank themselves to death on a cocktail of subprime debt and eye-wateringly complex credit derivatives they didn't understand, and who are ferociously challenging the OFT's right to assess even their overdraft charges for fairness.

The FSA has long huffily sworn-off regulating consumer credit. On the surface, a lot of it is provided by non-banks, so they think it has nothing to do with banking. That siloed, blinkered attitude must end, since we have become painfully aware that the whole financial system is inexorably connected and all product providers are either bank group subsidiaries or otherwise obviously rely on bank lines or financial markets funding at some point in the chain. Besides, the Consumer Credit Act and regulations are a nightmarish quagmire of bitter complexity and foolishness, which the Office of Fair Trading has been unable to use to do more than a poor job of protecting the consumer. As noted, the OFT has fared little better in its attempt to use unfair contracts regulation on the banks.

Regulatory plans appear feeble on the consumer banking front. The proposed Financial Services and Business Bill merely heralds the government's long-overdue plans to ban unsolicited credit card cheques. The Consumer White Paper goes somewhat further, calling for a quicker solution to the saga of the bank charges litigation, promising the said ban on unsolicited credit card cheques, and threatening both restrictions on credit card issuers repricing cards after issuing them and the removal of the "negative payment hierarchy" (i.e. ensuring that credit cardholders' repayments are credited towards the most expensive aspect of their card bills first).

But let's not forget that small businesses in the UK are owner-operated by about 4.3m individual people. As regulation - or the threat of it - bites on bank credit products, SMEs are being required to take commercial credit cards that aren't regulated and on which interchange and other fees are much higher than personal cards. Unless these cards are brought within scope, these people will find themselves right back where they started as humble personal cardholders without any regulatory protection... a miserable experience.