Jonathan Farrington’s Blog

JF Uncut

My original intention was to post about how it is going to be when we eventually emerge from the worst financial crisis in history. However, I need to digest the information now coming in from yesterday’s summit, and also a colleague sent me a very poignant and wholly relevant link last night, which I wanted to share it with you.

So before I launch into today’s post, I think you will enjoy this: “The Grocery Bagger”

Customer care has become one of the most important issues facing businesses in every market. Customer care programmes come under a number of titles - customer services, customer satisfaction, customer focus, customer orientated etc.

Their common theme is meeting the customer’s requirements and ensuring that all aspects of the business contribute to customer satisfaction. The intention is to build repeat business if customers are satisfied with the product and the standards of service they receive, they will return again and again.

Inconsistent Customer Care
 
Inconsistent customer care performance can have a negative effect on customer perceptions. Petrol companies for example, know that every time a customer walks into one of their outlets, wherever they are in the country, they should expect to receive the same standards of service. Nation-wide consistency is essential when customers are likely to visit multiple outlets – one poor performance can threaten the customer’s perception of the entire operation.

 What Is Customer Care? 
 
 Customer care is about addressing three sets of requirements:
 
• Customer
 
• Staff
 
• Organisation
 
These requirements are interrelated, i.e. it is more difficult to deliver consistently high standards in customer care if the needs of both the organisation and the staff are not taken into account

Customer Requirements
 
• Excellent personal service - feels valued, listened to, treated as an individual

• Products that meet expectations

• Encouragement to express views and give feedback

• Effective relationship with the organisation

• Problems and complaints are handled effectively

Staff Requirements
 
• Effective management style

• Suitable working environment - pay and conditions / tools for the job

• Relevant training to develop skills

• Career potential

• Clarity of role / job description

• Performance standards and appraisal systems

• Sense of involvement / value

• Open communication

• Teamwork

• Rewards / Recognition

Organisational Requirements
 
• Mission statement
 
• Corporate structure
 
• Feedback and communication systems
 
• Profit
 
• Human and technical resources
 
• Demonstrated commitment

Who Are Your Customers?  
 
If you are not serving the customer, you should be serving someone who is. Harmonious relationships with customers and colleagues are essential to service success, because providing outstanding customer service is primarily a team effort. For excellent customer service to exist it has to be practised on an internal basis

 The What And The How
 
 The “What” is the material and the “How” is the personal element. To be outstanding, organisations must deliver excellence in both material and personal service. Customer service is no longer just a question of interpersonal skills

The difference between you and your competitors is achieved when expectations are exceeded. Doing the unexpected, going the extra mile, moves us from meeting expectations to exceeding expectations

 How To Delight Customers:
 
• Be enthusiastic enthusiasm is the driving force of quality service. Customers do not just want products they want products plus enthusiasm
 
• Be professional the word professional does not go with the job it goes with the person
 
 Be The Best
 
• Someone, somewhere has to be the best at this job - why not me?

• Decide to be outstanding
 
How To Be The Best
 
• Use positive self talk - e.g. tell yourself ‘Everyday in every way, I get better and better’

• Don’t be ordinary

• Develop a ‘How can I do it better?’ mind set

 Today Everyone Sells
 
 In a successful company the number of sales people equals the number of employees

• Everyone sells something  - either products, services or the image of the company
 
 And Finally: How To Help Yourself Sell
 
• Pay attention  - give people the benefit of your attention

• Customers like to give their business to those who show they want it

Today’s News: As you can imagine, with a very wide circle of friends, colleagues and acquaintances, I am continually being asked to promote their webinars, tele-seminars, conferences etc. So, on Friday, I decided to launch a new service, that assists anyone looking to massively increase their event bookings.

 I sent out the first set of notification letters yesterday and someone actually thought I was serious

Tomorrow: It’s business as usual - do be sure to join me for a very exciting week.

The wet and bedraggled scrawny youth, that stood before me on that winter’s night in 1969, gave no hint that I was in the presence of a future rock star: He was dressed from head to toe in black apart from white patent leather boots and his grin, which resembled the keyboard of a piano - except that all the keys were glistening white - represented approximately fifty per cent of his entire face. 

His shoulder length wet hair hung limply, and before uttering his first greeting, he needed to part it, rather like opening curtains: He was instantly engaging. “Hi, I’m cousin George, all the way from America and I’m bad” he announced, as if he were already centre-stage rather than any formal introduction.

I was staying with my girlfriend and her parents for a short while before heading off to university and it transpired that young George represented the American wing of the family. I don’t remember how long he stayed with us,after all, it was nearly forty years ago, but it can only have been a matter of a few days.

He was like a breath of fresh air; full of energy, totally focused, and he didn’t have a negative vibe in his body. I learned so much from him in those all too brief few days and I regret not telling him that.

He talked incessantly about becoming a rock star - that’s when he wasn’t attempting to teach us the history of his beloved baseball. Oh, and I introduced him to my relgion - soccer!

Two box-office blockbusters were released that year and both became cult films: “Midnight Cowboy” and “Easy Rider” - George had already seen both of them about ten times:Despite that fact, he insisted we all went down to London to watch them again, and we of course, duly obliged.

He couldn’t pass a mirror without uttering Jon Voight’s immortal line: “When I feel cool and good, I spin around and there you are you handsome devil” Or we would be walking along the road and he would take an imaginery kick at a passing car with: “I’m walking here, I’m walking here” - with a superb impersonation of Hoffman’s character, Ricco Rizzo.

When asked how he was doing, George often replied:”I ain’t much of a cowboy, but I am one helluva stud” with another memorable reference to John Voight’s Joe Buck.

However, quotes from Easy Rider were also never very far away, and there was that wonderful scene where Peter Fonda, Dennis Hopper and Jack Nicholson shared a cell for the night. When Nicholson sobered up, Hopper intoduced Fonda and himself with: “Do you know who this is? This is Captain America, and I’m Billy!” Was that Nicholson’s first film? 

It all seemed very empty for quite a while after he left. I split up with that girlfriend soon after and didn’t expect to hear from him ever again. But the following Christmas, having rebelled against my parent’s house rules for the umpteenth time, I found myself with a few friends in a cold, damp flat sharing tins of cold baked beans and huddling around a one-bar electric fire: About 11pm on Christmas night, the phone rang; it was George: “This is your very good friend George, and I’m bad” I was so impressed that he had taken the time to find me.

That was the last I heard from him - the rest as they say, is history - he fulfilled his dream: He knew he would become a rock star - fulfilled expectation - and he brought about it’s happening.

So many people are affected by what will undoubtedly turn into the worst recession in history: But we will come through it and when we do, everything will be so much better than it was before. We have to work together, stay focused. By anticipating a better future, we will bring about it’s happening.

http://en.wikipedia.org/wiki/George_Thorogood

http://www.youtube.com/watch?v=Djj7jW6ny2M&feature=related

http://www.youtube.com/watch?v=_7VsoxT_FUY

Tomorrow: What will it be like when we come through this? What will have changed? What can we anticipate? Will it be better? - Tomorrow, my analysis and predictions.

Today’s post was inspired by a superbly perceptive piece of writing from one of my favourite columnists and editors of all time – William Rees-Mogg of The London Times.

I missed its publication, but my good friend Maureen Blandford – she of the Chicago Blandfords, and a confirmed Anglophile - kindly brought it to my attention.

It is titled: “The banks must rediscover Victorian values” - A mutual trust between client and bank was once the foundation of our financial system - we need to get it back

He begins:

“The British are - or were - particularly good at banking. British banking financed the Empire and the Industrial Revolution. These achievements owed a great deal to the stability of the gold standard, which lasted from Isaac Newton’s recoinage of gold in 1717 until Ramsay MacDonald’s abandonment of it in 1931. More than two centuries of exchange-rate stability gave the British banking system a stability of its own and, associated with that, a high standard of trust.”

He then goes on to recognise how things used to be, when trust, respect and loyalty actually meant something, when bank managers really were “pillars of society”

“The bank manager then occupied a similar position to the family solicitor or the family doctor. He hoped to maintain a long-term relationship with each client and he hoped that this relationship would survive for generations. He would offer general financial advice, and was concerned to keep the interest of the client and the bank in alignment.”

“After the Second World War, relationship banking went into decline. The banks were attracted by the impersonal profits to be made in transactional banking. They did not look for character as essential to their security. They invested in one-off transactions and increasingly in derivatives. They also relied on credit card and other unsecured forms of lending that could largely be administered by automated processes.”

Mr Rees-Mogg is a good deal older and indeed, wiser than I am. I do remember most of my respect remaining through the sixties and seventies, but I am hard put to identify a precise moment in time when I realised that dramatic changes were taking place.

He continues:
 
“At the same time, global banking became infected by the more adventurous American attitude to risk. US banks, going back to their 19th-century origins, had always been more speculative than the British tradition. They were more willing to take a big risk for a big profit. In the period of the internet bubble of the 1990s and the housing bubble of more recent years, too many British and European banks made the mistake of accepting American levels of risk in the pursuit of maximum profits.”

“Huge sums were lent to clients who might not be able to repay. The systems of bonuses gave bankers strong incentives to gamble with the bank’s money. They could not be supervised adequately by senior staff who did not grasp the details of the new securities in which their banks were speculating.”

“Where relationship banking still survives, there have been relatively few problems of bad debts. The problems have arisen in transactional and unsecured credit card banking with one-off or completely unknown customers. Of course the customers have often behaved badly; if a bank does not know its customers, who are only blips on a computer screen, some of them will behave badly. The bank only has itself to blame.”

He then reminds us that there is no end to the obscene and twisted behaviour of the “Fat Cats”

Having failed to regulate themselves adequately; having failed to protect the interests of their investors; having encouraged borrowers to take totally unacceptable risks by borrowing way above their capability to repay; having bankrupted themselves and been bailed out by the government (for government, read taxpayer) – they continue to seek more ways in which to pile the misery on. 

“The Sunday Times yesterday had a blazing example of the evils that can result.”

“Banks issuing credit cards have found a legal way of turning unsecured debt into debt secured on house property. That means that credit card debt, which banks have been ladling out to all comers, can lead to the repossession of the family home. Which bank is notorious for the harsh use of this loophole of which credit card customers were given no prior warning? Apparently it is Northern Rock, which was “rescued” by being nationalised. So the grotesque situation has arisen in which the Government is repossessing the houses of credit card customers - to their considerable dismay - as part of the rescue of an incompetently run bank.”

“The decline of moral responsibility has damaged British banks; it is the real flaw behind the credit crisis. There will be new regulation of the world’s banking system after the crisis. Governments cannot risk another catastrophe on this scale. The banks need to change their behaviour. They need to re-establish relations with their clients and value experience in their staff. They need to beware of American-style, high-risk, high-return, policies. British banking was based on protecting the client’s interest as well as the bank’s. Bankers should not be ashamed of their Victorian heritage.”

William Rees-Mogg has had a distinguished career with The Times and The Sunday Times. He was Deputy Editor of The Sunday Times before becoming Editor of The Times in 1967, a position he held until 1981. He was made a life peer in 1988. Since 1992 he has been a columnist for The Times, writing on a variety of issues. He has also been chairman of the Broadcast Standards Council and British Arts Council.

Tomorrow: We are back to the front-line, and my soap-box has been returned to the cupboard: Do join me for a particularly interesting week. JF
 

On this side of the pond, only serious observers of American politics had heard of Bradley A Blakeman; that is until last week, when he twice appeared on popular BBC political forums, hosted by David Dimbleby - now a lot more people have been exposed to this bumbling, out of touch, horse’s ass.

David is revered in the UK, and following in his father Richard’s footsteps, has become known as the “Voice of the BBC” – always commentating on Royal events and important State functions: He is also known for his patience, good manners and ability to remain in control, whatever the circumstances.

However, in the face of continuous interruption and downright rudeness from our Brad, even the demure Dimbleby was struggling to maintain his cool.

Lest we forget, it was Brad Blakeman, who tried to deflect the outrage caused by Sarah Palin’s extravagance, when she spent  $150.000 on a new election wardrobe, when he criticised Barack Obama’s decision to take a break from campaigning and visit his sick grandmother – see here 

Then Blakeman would not admit that the Republican Party blatantly lied to the electorate by claiming that Obama wanted to introduce sex education for kinder gardeners – when of course we all know the truth was that he wants to raise awareness of “Stranger danger” - see here

Then we have David Schuster laughing out loud at Blakeman’s economy with the truth - here

Back to the shows: At one point he tried to convince the audience and indeed the viewers, that America is loved throughout the world: “Of course everyone loves us, we help them, we go to their aid, we support them”

Dear Bradley,

It’s time for a reality check, my friend, America is probably the most unpopular country in the world right now. This is not a new phenomonem, it has slowly been building for about eight years – and that time period is not coincidental.

The rest of the world has watched with something bordering on incredulity, as the Bush administration has systematically sought fights with anyone who might dare to offer resistance, staggering into one conflict after another, and never, it would appear, with a Plan B.

It is estimated that the cost of your “sponsorship” in Iraq and Afghanistan will be anything from a staggering $1Trillion to $3 Trillion. There is no end in sight!

I am British and I opposed the invasion of Iraq, because, like many others from the “Thinking Classes” I did not accept that there was sufficient, reliable, evidence to suggest the existence of WMD – and we were right. But you convinced my Prime Minister and he in turn convinced Parliament – so without WMD, where is the motive and the justification?

But if you were to conduct a global poll right now, you would discover that the most obvious reason for the current level of mistrust, is due to America’s failure to pass legislation which would have given the Government greater control over Wall Street – and the fat cats who have gorged on obscene bonuses – and continue to do so, even in the face of catastrophic losses.

We can thank God that your revered leader “Not Gone But Forgotten” President George W will not be making any more world changing decisions. Then the real job has to begin, and it is going to be a long haul back.

The early signs are encouraging and by looking across the aisle when considering his new administration, President Elect Obama, has further demonstated that he knows what he doesn’t know. It is a wise man that can identify his limitations – it’s a great pity you didn’t have one in charge for the past eight years.

All we ask is that you lead us, not dictate us – we want to look up to you again and respect you.

You can start by keeping Bradley A Blakeman off our screens.

Sincerely

A World Citizen

PS: I actually love America; My eldest daughter, son-in-law and grand-daughter live there; I have an enormous amount of fantastic friends there and I may even consider retiring there – just thought you should know that.

*My thanks to Current for producing the excellent image.

Tomorrow:Thoughts about how it used to be before the finance industry “de-personalised” - is this where it all started to go wrong?

 JF Uncut

I have never been one for “La nostalgie” - I have always preferred to look forward, in the belief that what comes next will always be better that what has just been.

Witness a room full of divorcees who have since re-married and ask them if they are not now happier with their new partners than they were with their previous ones - they nearly all will be.

Or conduct a survey of employees who have experienced redundancy, but are now re-employed - they will all be much more content in their new positions.

When I am coaching my students on the power of self-belief, inevitably we have to discuss that most evil and cancerous state of mind that mankind has inflicted upon itself - negativity - I ask them to imagine a barrel of two hundred and forty healthy apples. I then ask them to mentally place one rotten apple half-way down the barrel, and leave it there for just one week.

Now, you would think that with odds of two hundred and forty to one, the rotten apple would be transformed, but we know that does not happen, and in just seven days, so many of it’s fellow apples who had previously been in such rude health, are now infected.

Happened in your office? I bet it has. You see, despite what most people believe, negativity is always stronger.

Why? - Well quite simply it is far easier to be negative than it is to be positive.

Much easier to criticise, complain or condemn, than it is to praise.

In my experience successful people are always more positive than negative. It’s as if they have invisible plastic wings on their shoulders, which prevent them from constantly looking backwards. They focus on the future, determined to make it better than the past. They refuse to carry the pain, the hurt, the disappointments, the poor results from previous times, on their backs in a huge sack.

These are difficult times that we are now living in - but nothing more than that. It was inevitable, bound to happen, as I have discussed within previous JF Uncut posts.

What is important is that we use the experience to make things better, to learn from the mistakes that have been made. We must expose the people and the actions that have placed us in this alarming predicament and ensure that it never happens again - we owe that to our children and their children.

But we must move on - look forward and not drown in a pool of self-pity. Whatever comes next will be better, you can count on it.

Winners & Losers

• A Winner Makes Mistakes And Admits - “I Was Wrong”

A Loser Says -” It Was Not My Fault”

•  A Winner Credits His Good Luck For Winning, Though It Wasn’t Luck

A Loser Blames Bad Luck For Losing But It Wasn’t Luck

•  A Winner Works Harder Than A Loser And Has More Time For Leisure

A Loser Is Always Busy, Too Busy Staying A Failure

•  A Winner Shows He Is Sorry Making Up For It

A Loser Says He Is Sorry But He Does It Again Next Time

“The winners in life constantly think in terms of I can, I will and I am. Losers on the other hand concentrate their waking thoughts on what they should have done or what they don’t do” - Dennis Waitley

Maybe, we will even re-discover trust and respect.

Tomorrow: It’s business as usual - be sure to join me for a big week - JF

Catalyst released some interesting statistics about women in business in the United States this month. 

Check out some of the information available in the Catalyst U.S. Women in Business report:

Percentage of women in the U.S. labor force: 46.3%
Percentage of women in management, professional and related occupations: 50.6%
Percentage of female Fortune 500 corporate officers: 15.4%
Percentage of female Fortune 500 board seats: 14.8%
Percentage of female Fortune 500 top earners: 6.7%
Percentage of female Fortune 500 CEOs: 2.4%

Here are some statistics from the Catalyst Women CEOs of the Fortune 1000 report:

Number of female CEOs of Fortune 500 companies: 12
Number of female CEOs in Fortune 501-1000 companies: 10
Total female CEOS in Fortune 1000 companies: 22
Looks like the business world has a long way to go to reach anything close to equality in leadership.

Those are pretty staggering statistics; we just do not appear to be moving forward at all.

I know literally hundreds of highly successful women in business, and I have so many really bright, highly astute associates right now, who all have a very broad commercial bandwidth:

Jill Konrath, Leslie Buterin, Joanne Black, Linda Richardson, Colleen Francis, Kendra Lee, Maureen Blandford, Robin Frey-Carey, Lori Richardson, Wendy Weiss, Cindy King, Cheryl Clausen, Diane Helbig, Debbie Fay, Rochelle Togo-Figa, Joan Paul, Kim Duke, Anne Miller, Tammy Stanley, Terri Dunnevant……….need I go on?

None of these richly talented female entrepreneurs would be out of place in a boardroom.

What I can tell you is that if I compiled a list of the top one hundred sales professionals that have worked for me, 70% would be women.

If I repeated the same exercise, but this time considered the best managers that have reported to me, the number would be at least 60-40 in favour of women.

Wake up America, you are living in the dark ages and frankly, you are being left behind.

Tomorrow: I need to turn my attention back to the money men - and women - and remind them how it used to be.

Final thought for the day: “Bank managers are like umbrellas - when it is tipping it down outside, can you find one? But then, miraculously, as soon as the sun comes out, you are tripping over them in the hallway”

And finally, finally - for the beautiful Alice Farrington:

 Thanks Bill - you are a genius!

JF Uncut

As sovereign governments of major countries in the world come under severe pressure to inject fresh funds in concert into their financial institutions and national economies, their tax revenue and customs departments are gearing up to crack down on private banking tax havens at lightning speed. 
 
In March 2005, the Tax Justice Network (TJN) published a research finding “The Price of Offshore”, demonstrating that USD 11.5 trillion of personal wealth was held offshore by the rich and ultra rich - High Net Worth Individuals (HNWIs) - across the globe.  This was based on data from many consulting firms and financial institutions including the Bank for International Settlements in Basel, Switzerland. The findings estimated that a large proportion of this wealth was managed from 70+ tax havens with Switzerland at the top of the black money pyramid.  The USD 11.5 trillion of assets held offshore would generate a return of about USD 860 billion a year at a 7.5% rate of return, and a consequent tax loss of USD 250+ billion for sovereign nations, more than three times the OECD countries’ official development assistance to the entire world. 
 
Surprisingly, India - still regarded as a poor country by many - has USD 1.5 trillion in Swiss banks, which is more black money than the rest of the world combined. This is thought to be unaccounted money earned in India by inappropriate means as otherwise any Indian citizen or corporation wishing to open a bank account abroad has to take permission from the Reserve Bank of India and records do not show any such permissions granted for deposits in Switzerland.  A 2006 report of the Swiss Banking Association claims Indians are the biggest depositors of black money in banks located in Switzerland.  Top five countries in terms of such deposits are:
 
India:  USD 1,456 billion
Russia:  USD 470 billion
United Kingdom:  USD 390 billion
Ukraine:  USD 100 billion
China:  USD 96 billion
 
With private account deposits of USD 1.5 trillion in foreign reserve which have been misappropriated, an amount 10 times larger than India’s foreign debt — USD 155+ billion — one needs to rethink if India is a poor country?  Many Indians regard this money as public loot since independence from Britain in 1947 and are asking, “Can we bring back our money?” 

It is argued that once this huge amount of black money and property comes back to India, the entire foreign debt can be repaid immediately, still leaving a huge surplus amount of foreign exchange reserves in India.  Some 80,000 Indians travel to Switzerland every year, of whom 25,000 travel very frequently. “Obviously, these people won’t be tourists. They must be travelling there for some other reason,” believes an official involved in tracking illegal money. And, clearly, he is not referring to the commerce ministry bureaucrats who have been flying in and out of Geneva ever since the World Trade Organisation (WTO) negotiations went into a tailspin!
 
South Asia has been hit hard by the “The Great Unwind” because it is an important part of the global economy which has caved in. Under pressure from the West, India opened up several sectors in the last two decades. However, it has been seen during the last few weeks that the Western financial institutions, hedge funds and capital providers have been the first to sell their shares in various Indian companies, bringing the share market tumbling down. It is estimated that in India alone the Western investors have been withdrawing USD 1+ billion in foreign exchange per week as they experience margin calls, unwind carry trades, and confront liquidity problems and greater hardship in their originating countries.
 
The Swiss Banking Association’s startling disclosure that Indians hold USD 1.4 trillion of their USD 2.15 trillion black money deposits is intensifying pressure on the Indian government to get access to that money as global financial pressures intensify and there is this accelerating flight of capital abroad.  The well known economist Professor Arun Kumar estimates black money generation in India to be currently 50% of the GDP.

The growth of black money in proportional percentage to the GDP has shown an alarming increase in recent years, from 20% in the 1980s to 45-50% at the turn of the century.  It is further estimated by experts that one per cent of the world’s population holds more than 57 per cent of total global wealth, routing it invariably through tax havens. 

A recent preliminary investigation to analyse the Swiss banking chain and to assess Indian wealth in that single country, suggests that the number is much larger than the USD 1.4 trillion figure and is more likely to be near USD 3 trillion.  The larger figure can be derived from the deposits in vaults of gold, diamonds and other precious gems alongside assets managed out of Switzerland in other tax havens.  There are some well known ’slush parks’ like St Kitts, Antigua, Bahamas, Isle of Man and Liechtenstein that multiply such holdings manifold with the central management points in Switzerland.
 
Raymond Baker, a US-based expert in illicit financial flows, in his widely referenced book “Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free Market System” estimates that at least USD 5 trillion have been shifted out of poorer countries to Western tax havens since the mid-1970s.  He estimated cross-border flows of global dirty money in a range between USD 1.1 to USD 1.6 trillion annually, about half of which came from developing and transitional economies, and two thirds of which is commercial dirty money.

In April 2007, the World Bank endorsed Baker’s figure.  Using his lower USD 500bn estimate for developing and transitional economies, Baker has said, “Through most of the 1990s, aid was running at about USD 50bn a year from all sources. It has edged up slightly in this decade. USD 50bn of aid in; USD 500bn of dirty money out. For every USD 1 that we [the West] have been generously handing out across the top of the table, we’ve been taking back some USD 10 of illicit proceeds under the table [via tax havens and other means].

There is no way to make this formula work, for poor or for rich.” The USD 500bn coming illegally out of developing and transitional economies is equivalent to 8% of their GDP.
 
In the 1990s, US Treasury department officials told Baker that illicit inflows into the US stood at around USD 250 billion per year, and in a good year they seized USD 250 million of that. This equates to a failure rate of 99.9%. The volumes have increased since then, but there is no reason to think that the failure rate has improved.  “Laundered proceeds of drug trafficking, racketeering, corruption, and terrorism tag along with other forms of dirty money to which the United States and Europe lend a welcoming hand,” Baker concluded. “These are two rails on the same tracks through the international financial system.” It is not possible to tackle any of these seriously without tackling them all. Baker’s opening speech at a recent conference explains some of the issues in stark detail, “No one I have ever talked to thinks dirty money is declining or that anti-money laundering efforts are stemming the global tide of illicit proceeds. Indicators point in the opposite direction.” Baker broke down his data like this:
 
Cross-border annual flows of Global Dirty Money - Low - High
 
1.  Criminal — USD 331 - 549 billion
2.  Corruption — USD 30 - 50 billion
3.  Commercial — USD 700 - 1,000 billion
 of which:    
 Mispricing - USD 200 - 250 billion
Abusive transfer pricing - USD 300 - 500 billion
Fake transactions - USD 200 - 250 billion
 
TOTAL -USD 1,061-1,599 billion
 
Experts point their finger at the new investment environment of the last two decades which shunned state intervention and favoured massive deregulation.  The retreat of the nation state ensured that the restraint exercised on capital to keep its greed in check was diluted and some amount of the black money went into the process of being legalised.  They point out that in a free market environment takeovers were much easier. Those who possessed black money tried to buy legal businesses to gain legitimacy for their shadow wealth.  The Great Unwind has reversed this process.  Watch out particularly for the United States, Euro-zone countries, United Kingdom, China, India and Russia in regard to the coming sovereign crack down of tax havens worldwide.

Today’s News: One of the most jaw-dropping bulletins ATCA received this week was the announcement by Volvo, the world’s second largest truck maker.  In the third quarter, Volvo received just 115 net order bookings for new trucks in Europe, down from 41,970 a year earlier, ie, a degradation of 99.7%.  In Europe it had almost as many cancellations as new orders.  Year-on-year orders at Volvo crashed 55% in the third quarter.  The company said that the slowdown appeared to be spreading to emerging markets and its orders in North America had failed to recover. 
 
Why?  Volvo’s customers are apparently holding back on replacing vehicles because of the economic uncertainty, and some are not receiving credit to finance new trucks because of tighter credit market conditions.  Scania — majority-owned by Volkswagen — which is not present in the depressed US market, has also received 41% fewer orders than in the same period last year, with a 69% decline in western Europe.  Both Volvo and Scania have declined to give an outlook for next year given the financial uncertainty.  Both truck makers have been cutting production by cancelling shifts and laying off temporary workers. 

Tomorrow: It is business as usual, so be sure to join me.

JF Uncut

Watching a French TV programme last week all about “the haves” and “the have nots” in Moscow, where a very wealthy woman was purchasing a punnet of six strawberries for the equivalent of $50, I was reminded of a story that was related to me a few weeks back…..

Two elegant Russian women arrived at a Heathrow check-in desk at the same time, and were admiring each other’s Vuitton luggage, which was identical in every way: “$10.000 from Paris” the first one claimed, with considerable pride. “$17.000 from Moscow” the second retorted, almost disdainfully.

So there we have it, a perfect example of why Moscow is now, irrefutably, the most expensive (and vulgar) city in the world - the rich are getting richer and the poor are looking on, in total disbelief.

Well the rich were getting richer, up until very recently, and I watched another superb French documentary this week about Russian “oligarchs” (Don’t go thinking that I indulge myself in French television, it is not that good - just two hours this week, the rest was crap! - thank God for satellite dishes and the good old BBC)

Oligarchs? Here’s what Wikki has to say:

“Oligarchy (Greek Ὀλιγαρχία, Oligarkhía) is a form of government where political power effectively rests with a small elite segment of society distinguished by royalty, wealth, family, military powers or occult spiritual hegemony. The word oligarchy is from the Greek words for “few” (ὀλίγios olígios) and “rule” (ἄρχeiv arkhein). Such states are often controlled by politically powerful families whose children were heavily conditioned and mentored to be heirs of the power of the oligarchy. This type of power by its very nature may not be exercised openly; the oligarchs preferring to remain “the power behind the throne”, exerting control through economic means. Oligarchies have been tyrannical throughout history, being completely reliant on public servitude to exist. Although Aristotle pioneered the use of the term as a synonym for rule by the rich, for which the exact term is plutocracy, oligarchy is not always a rule by wealth, as oligarchs can simply be a privileged group.”

Financial sources estimate Russia’s oligarchs have lost as much as $230 billion during the recent fall of the world’s stock markets - that’s almost $7 billion per oligarch.

“They should take us all off the Forbes list” of billionaires, said Alexander Lebedev, who owns 30 percent of the Russian airline Aeroflot and was ranked by Forbes Magazine as the world’s 358th richest man.

Lebedev said he may have lost nearly half of his estimated $3.1 billion stock portfolio, The Times of London reported Saturday.

“The bell has started to ring,” Lebedev said, noting the financial meltdown may bring some sanity to the lives of Russia’s big spenders, the Times reported.

It’s “reach for hankies time”

Roman Abramovich, a steel magnate who owns Britain’s Chelsea Football Club, (Now known in the UK as “Chelski”) is estimated to have lost more than $20 billion in recent market trading, while Oleg Deripaska, reportedly Russia’s richest man, has lost billions of his estimated $28 billion empire, the Times also reported. 

There were fewer than 150 billionaires put on the Forbes list twenty year ago. Nowadays things have changed. The 2006 Forbes list of billionaires contains 793 entrants. The computer genius Bill Gates has retained the title of the world’s richest man for the twelfth consecutive year. He added about $5 billion to his net worth this year.

There are 33 Russian billionaires on the latest list. Next to New York, Moscow has the biggest number of billionaires - and yet when it comes to “standard of living” Russia is 57th in the world?

Unsurprisingly, most Russian billionaires reject the Forbes ratings. Nearly all of them make statements claiming they cannot be that rich. Boris Berezovsky seems to be the only exception, he is still out of reach of the Russian Prosecutor General’s Office. However, none of the tycoons has sued the magazine for libel.

Therefore, we can assume that the Forbes ratings are quite accurate.

One of the very few consolations of all this financial turmoil and chaos, is the daily dose of revelations.

Stories of even more obscene gluttony, greed and astonishing financial mis-management.

I watched Greenspan this week, looking totally bereft of an explanation, describing our current experience as a Tsunami, and that in itself, is probably the most pathetic and implausible utterance this once revered man has ever made: Note to AG.

Dear Alan,

For the record, a Tsunami is known for it’s suddenness; it strikes without warning and almost always leaves a path of total destruction in it’s wake.

The legacy you have left us with - conveniently stepping down just prior to it’s arrival- did not creep up on us: Most observers with an IQ higher that a gnat’s left testicle, recognised the signs years ago, how come you didn’t? Or maybe you did and chose to ignore them? Why did you take a stand against regulation as long ago as 2004?

“Give me one example where regulatory control would have made a difference JF” I hear you say.

AG, I can give you hundreds, but here is just one:

Fannie Mae misstated earnings for three and a half years, leading to a $9 billion restatement that wiped out 40% of the supposed profits in the period - fair enough?

So many “why’s?” AG

Yours In Total Disbelief

A Sucker

It can only be hoped that in years to come, there will in fact be greater regulatory control and increased visibility. Our trust has been shattered, and as I survey the pieces scattered liberally around my feet, I remain unconvinced that recovery will be as swift as our over-optimistic political leaders would have us believe.

November 15th could represent Bretton Woods II - we wait and we wonder, but we no longer have faith.

Tomorrow: “India Is A Very Poor Country - Oh No It Isn’t” - more revelations here on JF Uncut

JF Uncut

My intention was to post on the fact that it is going to get a whole lot worse and explain why, but having just read yesterday’s Guardian newspaper, I needed to share this with you. My mouth is still wide-open; I am stunned; Is there no end to the obscenity of it all?

Wall Street banks in $70bn staff payout Pay and Bonuses

Financial workers at Wall Street’s top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government’s cash has been poured in on the condition that excessive executive pay would be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany’s Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.

Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m.

None of the banks the Guardian contacted wished to comment on the record about their pay plans. But behind the scenes, one source said: “For a normal person the salaries are very high and the bonuses seem even higher. But in this world you get a top bonus for top performance, a medium bonus for mediocre performance and a much smaller bonus if you don’t do so well.”

Many critics of investment banks have questioned why firms continue to siphon off billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions. One source said: “That’s a fair question - and it may well be that by the end of the year the banks start review the situation.”

Much of the anger about investment banking bonuses has focused on boardroom executives such as former Lehman boss Dick Fuld, who was paid $485m in salary, bonuses and options between 2000 and 2007.

Last year Merrill Lynch’s chairman Stan O’Neal retired after announcing losses of $8bn, taking a final pay deal worth $161m. Citigroup boss Chuck Prince left last year with a $38m in bonuses, shares and options after multibillion-dollar write-downs. In Britain, Bob Diamond, Barclays president, is one of the few investment bankers whose pay is public. Last year he received a salary of £250,000, but his total pay, including bonuses, reached £36m.

Tomorrow: It is business as usual. I just have to hope that my blood pressure returns to normal and my glasses de-mist once the steam stops hissing out of my ears.

JF Uncut

Do cheer up. There is no such thing as all bad news. Every cloud has a silver lining…

Some good things are happening. The price of oil has tumbled 40% since July. House prices in the UK are down 13% from last year. Those with strong nerves and some money can even buy shares that are unbelievably cheap.

Restaurants are emptying, air travel is easing and I noticed last week that central London traffic jams were strangely diminished. Soon, hotels will be discounting heavily and luxury holidays will suddenly become affordable.

Yes, some people are poor and some are out of work, but not everyone; not even a majority. Keynes was right. The most important thing in a recession is for those with money to keep spending it. Those without can cite Aquinas and remember that the best things in life are free.

The greatest boon to result from the financial collapse is the end of the age of hysteria. We shall never again hear Gordon Brown inflating the dotcom bubble or boasting “the death of boom and bust”. Those whose vulgar boosterism was unsuited to national leadership have been silenced.

Instead we can listen to the sweeter voice of caution. Last week on the BBC a construction executive declared “an end to the tall cranes” and a reversion to the repair and renovation of existing buildings. I cheered loudly.

Gone, too, should be the facile hyping of home ownership by housing ministers. Their talk of the “right” of all young people to buy a house saddled millions with debt they could not afford and with career inflexibility. In every other European country, most young adults pay rent.

The collapse of the buy-to-let market should lead to rents plummeting and people spending realistically on housing. The end of the home-ownership boom should encourage existing owners to sublet and reduce the under-occupancy that has long inflated British house prices. This is a good thing for all.
The green belt, threatened by avaricious speculators, can breathe a sigh of relief. The government’s spurious “eco-towns” should be halted and its “pathfinder” bulldozers should fall silent across northern cities. Economy should return to the overheated property market, with builders switching to energy-saving conservation from high-cost development.

The impact of recession on government should be even more benign. Only now do we see how casually the rampant growth in revenue has led ministers to behave. There should be no more extravagant pay settlements for doctors; no more thoughtless purchase of NHS and ID-card computers; no more of the £70 billion that Labour has spent on “advice”. The death of spurious consultancy and the reassertion of civil service morale should be another gain of the recession.

Someone may even reverse the government’s capitulation to the International Olympic Committee over the cost of the Olympics – though sadly not the London mayor, who has gone native; £9 billion of public money cannot be justified for two weeks of sport when the exchequer is bleeding to death. Britain would gain worldwide kudos if it announced a 1940s-style austerity Games, in place of the turgid extravaganza at Stratford.

The rewards of adversity will go even deeper. The dingdong of political debate in the past two decades has depended on a dichotomy of free markets and state control. The market has had the best tunes. It has now met a cataclysm similar to that which afflicted state planning in the 1970s – if not the 1940s. Thatcherism has for quarter of a century assumed an ideological supremacy. Now it seems in ruins. From thesis and antithesis should emerge a mature synthesis.

Markets cannot be denied. They allocate resources in any enterprise economy. But markets require regulation by a controlling state. In extremis they require the confidence on which they depend to be guaranteed by the state. Citizens as taxpayers must underpin that confidence if they wish to avoid the most ruthless form of “market correction”, as now being experienced.

The age of hysteria was the converse of today’s (we hope brief) age of panic. The “mergers and acquisitions” mania that spread through almost every sector of the British economy now seems destructive and expensive. It distorted corporate incentives and made enterprise no more than the appeasement of greed. The thesis that the disruption of selling Heathrow, breaking up railways or disposing of utilities was justified by efficiency was never proven – and now looks sick. It saddled vital services with unsustainable debt. All this must surely end.

Britain will emerge from recession with manufacturing shattered. But the services on which the economy relies should be in recoverable order. The country remains a world-class supplier of hospitals, education, retailing, tourism, culture and even financial services. London is still a bolt hole for refugee and rentier alike. Its appeal to the world’s rich can only increase as its prices cool.

The age of hysteria should give way to an age of humility. The bombast of Tony Blair and his worldwide crusade for capitalist democracy – enforced with bombs and belligerence – was a counterproductive obscenity. How can we lecture Russia, China, Africa and the Muslim world when we cannot even regulate a sub-prime mortgage market? Where now the pledge to “end world poverty” or to “bring peace to the Middle East”? These presumptions were not just arrogant but absurd.

Social economists have long emphasised non-economic gains in contributing to the good life. They point out that human happiness depends not on ever-rising incomes but on the ordering of leisure and a sense of self-worth. The downfall of the masters of the universe leaves space for the rise of the masters of realism and personal satisfaction.

These are uncertain times, but in every disaster there is good news to be found. For all Pandora’s ills that have spilt across the nation this past month, we should remember the little creature who stayed behind in that mythical box of catastrophes. Her name was Hope. She was a cheery fellow.

Tomorrow: “Why Markets Are Still Falling - The Real Truth, In All It’s Ugliness”