are the banks paying off their loans?

[ZondaMark]

Very well put, munky!

munky said:

perfect... market for matching up lenders funds...

Division of labour...

This is the crux of it; of course, the corollary of coyft's argument would be that everyone would be better off being a jack - and indeed master - of all trades. Hmmm...

munky said:

...unless of course we import our financial services, which then means money is flowing out of the country rather than in.

My only objection is to this bit (once taken beyond the bilateral exchange between domestic importer and foreign exporter), precisely because we have our own currency and it all goes full circle.

[ZondaMark]

coyft said:

sidicks said:

Put simply, the fund managers are the market, so only half can beat the market and half will underperform.

That's just wrong on so many levels. Here are some "friction" stats for you.

On average the S&P 500 outperforms 80% of mutual funds.

Burton Malkiel who wrote "A Random Walk Down Wall Street" compared $10,000 invested in the S&P 500 Index fund
to $10,000 invested in the average actively managed mutual fund. The time period was from 1969 -1998.
The Index investors fund was worth $311,000 while the actively managed fund was worth $172,000.

That's a lot of Friction. The fund managers charge their management fees regardless of performance.

How do you square that with your statement that half will beat the market?

Not disagreeing with you at all here, coyft, but:

1) No one's forced to use them. You'd think the systematic underperformance would educate them, so perhaps there's another reason that investors continue to use them. Okay, in the long-run, the passive approach returns a bit more, but maybe people are happy to pay for the (albeit futile) potential to outperform.
2) How do you think the performance of the average investor with a few grand compares (especially once trxn costs are factored in)? [Assuming the above.]

[NorthernBoy]

groak said:

youngsyr said:

Historically I believe the problem was that the bank bosses' "bonuses" were contractural, so there was no legal way for them to be cancelled even if the banks failed and were bailed out by the government.

Surely the contractual basis of bonus is performance related? Bad enough to pay an agreed and unconditional salary to the captain of a ship which runs aground on his watch, but surely no-one agrees to pay a win-lose-or-draw bonus on top?

You sometimes need to pay it to tempt someone to join. Most people won't go into a job which is quite an unknown quantity just based on someone's word that they'll "be looked after".

In this case, of course, it explicitly is not a performance based bonus, it's a guaranteed payment.

After that, most are discretionary, not contractual. Most years I was given what he boss thought he could get away with paying me. That might be ive figures, six, or seven. In a bad year, it might be zero.

[NorthernBoy]

coyft said:

This isn't complicated it is very straightforward.

In an efficient market, willing lenders would lend to willing borrowers. There would be no need for a finance industry, clearly no market is 100% efficient. The more we come to rely on the financial services industry, the more inefficient the market is and the result is more friction. It is not a difficult concept to grasp.

That's possibly the stupidest post I've seen on finance on here.

Possibly the stupidest anywhere.

Here's something for you to think about, a nice simple example for you. You are a British company, with British income, and want to buy components from Germany.

Don't ou think, just possibly, that you might need to transact some FX?

Or in your world does no money ever cross borders?

[onesmallstep]

coyft said:

This isn't complicated it is very straightforward.

In an efficient market, willing lenders would lend to willing borrowers. There would be no need for a finance industry, clearly no market is 100% efficient. The more we come to rely on the financial services industry, the more inefficient the market is and the result is more friction. It is not a difficult concept to grasp.

exactly, job creation for middle class boys who can't do a proper job.

financial services do not create wealth, they steal money from everyone else.

[onesmallstep]

NorthernBoy said:

coyft said:

This isn't complicated it is very straightforward.

In an efficient market, willing lenders would lend to willing borrowers. There would be no need for a finance industry, clearly no market is 100% efficient. The more we come to rely on the financial services industry, the more inefficient the market is and the result is more friction. It is not a difficult concept to grasp.

That's possibly the stupidest post I've seen on finance on here.

Possibly the stupidest anywhere.

Here's something for you to think about, a nice simple example for you. You are a British company, with British income, and want to buy components from Germany.

Don't ou think, just possibly, that you might need to transact some FX?

Or in your world does no money ever cross borders?

haha, and why can't it be done automatically? we don't need to pay some middle man to work out a simple calculation.

let's face it all financial services are just dinosaurs from a bygone age. They are going drag us all down with them though.

we don't need any of them for anything they are a hindrance and an overhead to everyday life.

[ZondaMark]

onesmallstep said:

exactly, job creation for middle class boys who can't do a proper job.

Bitter much?

onesmallstep said:

financial services do not create wealth...

They wouldn't exist if that was true.

onesmallstep said:

...they steal money from everyone else.

That's odd - could've sworn my own dealings with them were entirely voluntary.

Edited by ZondaMark on Sunday 16th January 13:07

[ZondaMark]

onesmallstep said:

haha, and why can't it be done automatically?

Just how would that work?

onesmallstep said:

we don't need to pay some middle man to work out a simple calculation.

Is that all it involves?

onesmallstep said:

we don't need any of them for anything they are a hindrance and an overhead to everyday life.

Single biggest industry and tax revenue generator? How many businesses do you think would exist without them?

[onesmallstep]

hmm, don't trust the telegraph anyway.

http://www.telegraph.co.uk/finance/newsbysector/ba...

don't know how to post a link, it says the bank bail out could add 1.5 trn to national debt,

don't know where they got that from, they make us money.

[onesmallstep]

ZondaMark said:

onesmallstep said:

haha, and why can't it be done automatically?

Just how would that work?

onesmallstep said:

we don't need to pay some middle man to work out a simple calculation.

Is that all it involves?

onesmallstep said:

we don't need any of them for anything they are a hindrance and an overhead to everyday life.

Single biggest industry and tax revenue generator? How many businesses do you think would exist without them?

Sack all the bankers, then try it.

The only things we would notice are that money transfers more quickly and we have more money.

[ellroy]

onesmallstep said:

ZondaMark said:

onesmallstep said:

haha, and why can't it be done automatically?

Just how would that work?

onesmallstep said:

we don't need to pay some middle man to work out a simple calculation.

Is that all it involves?

onesmallstep said:

we don't need any of them for anything they are a hindrance and an overhead to everyday life.

Single biggest industry and tax revenue generator? How many businesses do you think would exist without them?

Sack all the bankers, then try it.

The only things we would notice are that money transfers more quickly and we have more money.

Do not feed the troll.

[Durruti]

onesmallstep said:

hmm, don't trust the telegraph anyway.

http://www.telegraph.co.uk/finance/newsbysector/ba...

don't know how to post a link, it says the bank bail out could add 1.5 trn to national debt,

don't know where they got that from, they make us money.

Look, you really have to get over this. The doubling of the national debt and potential for this to cause economic harm or distress to our bonds MUST be seen as the investment it actually is. Once these fine institutions have recovered their proper value and are again trading at £14,000 per share, we will all be filthy rich because of the wisdom of the actions of Gordon Brown in backstopping these fine, strong British companies in their hour of need. Once they have worked all the bad credit card debt, loss making mortgage loans, loss making commercial property loans, wonderful MBS tranches stuffed full of top quality American Mortgages (or, depending on the american legal system, actually containing nothing- although this would at least give us a shot at recourse via putbacks) and several other little issues, they will be AAA, solid gold, safe as houses investments.

You just have to be prepared to wait a (year/decade/generation - delete as appropriate) or two for your Jam.

And remember, don't focus on the banks as the source of these problems. It was the politicians and the public that fed this situation. The banks just acted as facilitators for our wider stupidity. They hold no moral role at all in the malaise that is modern economics. Much as you would not hold accountable the drug dealer that sells cocaine to your kids for profit, these people were just servicing a demand. Having them at your elbow whispering "go on, one little shot of credit won't hurt, you'll like it, look at how much all your friends are enjoying themselves, try it..." was just them trying to be helpful and offering a service, it wasn't something you didn't have much choice in now was it?

If you were silly enough to join the mass delusion created over the last decade that a 2 up 2 down terrace was actually worth £38 million then silly you. Of course, your alternative was effectively to live in a tent or a cardboard box as wider society drove the price of somewhere to live into the stratosphere, but if you don't have the self discipline to suffer a bit - Britain is temperate after all and it's only the winter that gets cold - rain can be kept off with a bin bag so there's no real excuse - then you only have yourself to blame.

I mean, it wasn't as though anyone lied about any of the consequences. No one saw it coming. It started in America. Good God man, these banking chappies are the smartest men in the room, they don't draw their salaries and bonuses for being stupid or incompetent. Of course property prices are only ever a one way bet, everyone knows that. What could possibly go wrong with basing an entire industry on the premise that growth is perpetual and unstoppable. And no bleating about historical examples either. It was different this time. They really believed that, scouts honour.

It's a good job that figure doesn't include PFI liabilities or unfunded liabilities such as public sector pensions, otherwise you might be getting slightly miffed and concerned about how you are going to afford the repayments. It's enough to make a Tunisian reach for his facebook and update his status to "grumpy".

[Ozzie Osmond]

Durruti said:

these banking chappies are the smartest men in the room

"Ladies and gentlemen, here today for your delectation and delight, Adam Applegarth's mum tells why she believes Adam always was doing a great job!"

Thanks Mrs Applegarth, we'll look forward to hearing from you again soon! By the way, how's Adam enjoying his new job as Governor of the Bank of England? Leastways, that's what he told me was planning when I last saw him clearing trolleys in Tesco's car park.

[Durruti]

Ozzie Osmond said:

Durruti said:

these banking chappies are the smartest men in the room

"Ladies and gentlemen, here today for your delectation and delight, Adam Applegarth's mum tells why she believes Adam always was doing a great job!"

Thanks Mrs Applegarth, we'll look forward to hearing from you again soon! By the way, how's Adam enjoying his new job as Governor of the Bank of England? Leastways, that's what he told me was planning when I last saw him clearing trolleys in Tesco's car park.

Adam Applegarth is a highly successful man, whichever way you look at it.

Check his bank balance - now check yours.

Check his house out, both size/quality and mortgage status - now check yours.

Check his pension pot out - now check yours.

Check his retirement age out - now check yours.

Check out his swanky golf club memberships - now check yours.

Check out his fleet of expensive cars - now check yours.

There is a lesson to be drawn from the above.

Mug.

[ZondaMark]

ellroy said:

Do not feed the troll.

Which one?

[onesmallstep]

So the banks are insolvent, if house prices fall further, they become more insolvent, but the economy cannot recover until house prices fall. So you see the problem?

It's about time we put them out of their misery.