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Archive for January, 2012

The taxpayer’s dilemma

January 27, 2012 Leave a comment

So here is the dilemma. The taxpayer is nursing a hefty loss on RBS shares. The public are desperate to find blame. The unions are up in arms over job losses. Whilst all this squabbling goes on, the facts are clear.

RBS needs to become profitable again. Executive pay is relative and at the moment the going salary may indeed be circa £1m. If you pay peanuts you get monkeys and everybody loses out.

However any derivative wizard will tell you that the bonus scheme should only kick in at the break even price for the taxpayer. In short, the bonus options are worthless until RBS shares reach the break even price for the taxpayer and then rise pro rata with the share price. Why not even throw in an expiry date as well just for good measure?

This way everyone benefits from what is undoubtedly a very grim situation. One final thought, SME’s are crying out for bank finance. Nobody is lending. What an opportunity to be a bank!

Throw in a few jobs as well and everyone really is a winner.

Banks Hoarding ECB Cash to Double Company Defaults: Euro Credit

January 27, 2012 Leave a comment

Quote from recent Bloomberg article

“Banks are using the 489 billion euros they borrowed at 1 percent from the ECB under its three-year longer-term refinancing operation to scoop up government bonds yielding more than 2.5 percentage points extra instead of lending the money to companies.”

Where is the regulator in this activity? Does this mean that the European taxpayer is contributing to the banks’ profits by allowing money to be borrowed at 1%. Furthermore, in the event of a government default how will the bank repay the ECB?

Would it not be more sensible for banks to borrow from the ECB at 1% and then lend to companies at 3-4%. The companies they lend to (assuming sound business practice) would be more likely to repay and the economy would start growing again. This in turn would help reduce unemployment and so it goes on…

Simplesimon8, simple is best.

The banks aren’t lending but shrewd pawnbrokers are…

January 27, 2012 Leave a comment

Pawnbroker to open 12 sites in Scotland

Published on Tuesday 24 January 2012 03:46

PAWNBROKING chain The Money Shop yesterday announced plans to open 12 stores in Scotland as part of a UK-wide expansion programme.

The company, which already operates more than 20 outlets north of the Border, said the move was in response to rising demand due to less credit being made available by banks and changing attitudes to pawnbroking.

Neil Surgenor, the firm’s head of pawnbroking, said customers increasingly see using pawnbrokers as “borrowing from themselves” with over 80 per cent coming back for their pawned possessions.

Across the UK, the firm is planning to open 50 outlets in 2012, creating 330 jobs.

The Money Shop’s parent company, Dollar Financial, also owns pawnbroking businesses Duncanson & Edwards in Edinburgh and Robert Biggar in Glasgow.