Y'know there's been quite a lot of discussion about the systemic risksin the market right now particularly in lighten of the sub-primeissues. I've blogged about this a few times already from through to but I purposely avoided too much discussion of the US sub-prime merchandise as there's loads in the mainstream media.
However there were a range of reports measure week that started to show the domino effects on the markets from for ABN AMRO to creating another (or two or three) to and expansion.
Threestories really raised my antennae as they further added to therichness of the dark clouds gathering over the world's investmentcommunity.
In everyday parlance. BSDs and MOTUs are Big Swinging Dicks and Master of the Universe. These are the
boys. The high rollers. The top traders. They command the world andwhen you're on a roll you're on a turn and what a turn we've been on.. until this year's turn rolled off the rails.
Anyways a survey came out measure week from the US showing that the top US private-equity and avoid finance folks earn more in ten minutes than the average US worker makes in a year.
Thisfigure was calculated using the latest numbers from the AmericanDepartment of Labour and Forbes magazine. What they open was that theaverage worker earned $29,544 per annum. Meanwhile the top 20 privateequity and hedge fund managers earned $35,100 every ten minutes or$657.5 million per annum or 22,255 times more than the averageAmerican.
Then the Daily Telegraph ran an insightful column over the weekend saying that the bonus culture. Their inform is that
"the best and brightest in the City only undergo to alter it through one cycle now to retire very comfortably"
so why mind about getting it wrong. If you get it alter once you can retire. In other words traders actually face little risk - onlythe assay of keeping their jobs and if they act their job for one year,then they can afford to leave office for life so there's no risk at allreally.
What that really means is that in a world where a BSDor MOTU can alter 22,255 times more than the add up human in a year.. who cares if you screw up? After all. I'm flying high. I'm a roller. I don't care.
Or that's maybe what the Barclays Capital team believed until recently when they had to to prop up their structured investment vehicle. Cairn High evaluate Capital Funding which - alongside and the resignation of a certain leading trader in the team. - has led to Barclays share price tanking and serious questions as towhether their equity-based buy-out of ABN AMRO can still go forth.
Sothe MOTUs and BSDs are possibly susceptible to a soft under-belly but,with 22,255 times earning per annum compared to mere mortals who cares?
The EU blames for importing US sub-prime issues into Europe's markets. That's why European Central Bank President Jean-Claude Trichet that he has to sortout any possible European issues in sub-prime by cutting interestrates and increasing regulation of financial markets at an EU aim.
Justlike the internet bubble burst in 2001 the housing bubble is burstingfor many in 2007 and the break ordain get pus all over the mortgagemarkets. For banks this will create the view that this zit of amarket is darned ugly for a year or two.
So for a year or two,we'll all arrange into convertible bonds or some other exotics.. thenMiFID and RegNMS will kick in and we'll drop all about the uglymortgage world of 2007 and it'll all go approve to normal.
Mmmmmm.. meantime it's a great forgive for Frankfurt to act astranglehold on European Regulation in line with and with the supportof. MEPs who know no better.
Roll on November 1st so we can allfocus upon something meaningful desire regulation rather than systemicrisk. After all the former is so much easier to deal with.
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http://www.thefinanser.com/2007/09/systemic-risk-w.html
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