Friday, November 25, 2005
Stock Loan traders: Just idiots with phones?
Why are these people so objectionable?
Firstly stock loan traders aren't 'traders' at all. This is the misnomer that is the root cause of the problem. They are merely glorified order fillers. No different from serving coffee or fries or doughnuts. Consider the following
I would like a big mac please for 2.99
I would like to borrow 1 share of Vodaphone at 1.20 please.
Spot the difference. No. Well the main difference is that the people serving in fast food joints tend to be politer, brighter and of course you guessed it much more numerate. The number of times the fee/rebate/tax rate is incorrect on stockloan trades, even when the front end systems have fool proof buttons need to be seen to be believed. The question for managers of these morons should be is not how much money are my stock loan traders making me - but how much are they costing me - amongst other things in
Failed trades
Unnecessary over-borrows
Lost tax credit and planning opportunities
Opportunity costs of depot mis-management
As over-paid simple jobs go - it doesn't get any easier. Yet this seems to encourage them to ape the behaviour of their thinking counter-parts, such as structurers or even cash/equity traders. The most objectionable people in this arena tend be the 'Heads' of Stock loan as they they proudly call themselves.Normally ex-UK settlements clerks who found new homes after CREST was introduced so there was nothing for them to do. I look forward to the day when the whole of the stock loan trading is totally automated and we can get rid of these people.
Risk Managers: Money for nothing. Just passing the buck?
RB
Scared of Avian Flu?.........don't be so Chicken: Why bird flu could be good for pay & pensions.
RB
Thursday, November 24, 2005
Earn lots - Do Nothing , become a central banker!
Barclays - Is the Barc[ap] worse than its bite? Why be long Barclays?
Currency Movements Dollar/Sterling:No way but down
- US Consumers love consuming- they will never stop spending that's their constitutional right seemingly. Long live imports from China/India etc.
- There is an unprecedentedd house price inflation boom in the US, as in the UK. Remember Tony is just Bush lite.
- Most currencies in the developed world have abandoned the gold standard - so all the dollars in the world are not really worth the paper they are written on, so to speak. Our own super smart chancellor sold UK gold reserves a few years back- now gold has hit multi year highs per troy ounce. Such a move in any other job would get you fired - but instead he will probably become PM .But I digress. So really all currencies are merely confidence tricks and bad ones at that.
- China has liberalised yuan/dollar to a semi-floating rate.
- Japan isn't going to keep buying US debt forever , and will probably dump some dollar reserves.
- Bernanke has said his policy will be to target inflation, unlike the the Bank of England at least he has a clear policy.
- Commodity prices will only go up due to demand in developing economies. Oil is back down from 70$ a barrel, but copper, platinum and gold are still going up. Why?Becausee these metals have some kind of intrinsic value not linked to the vagaries of market demand/supply. In other words they are not confidence tricks.
- The interest rate cycle in the US is probably at the top, consumers need cheap credit to keep spending . Cheap money and high institutional liquidity mean a rising stock market in the US .
So here's what will happen:
- The dollar will weaken - the US will just keep printing more dollars till they run out of paper.
- The US deficit will actually go up not down - this is a red herring - the US will never go out of business. When the economy slows down they will just start wars. Remember wars are always good for economies in the long term.
- Sterling will weaken vs dollar , because UK interest rates are suspiciously high for an economy in decline ( the government growth figures are basically fabrications as certain bodies have now pointed out)
What to do..a couple of ideas
Simple buy US assets( shares, property- whatever- avoid auto companies, obviously)
Go long dollar/sterling calls
RB
Wednesday, November 23, 2005
Let's go to Business School, Why not?
Business Schools are a great way to increase your pay without actually learning anything. But best of all they can help you totally lose your moral compass - if that's what's holding you back in your career. Most measures of a business school's standing in the world really revolve around post graduation pay. I note that the newspaper rankings include drivel like 'international students, quality of teaching, etc.etc. This is merely to obfuscate the fact that 'business' itself cannot be a subject.It is of course a ridiculous idea. Peter Drucker ( recently deceased) was early to recognise this. But the business of business schools is to make money , like any other business.
RB
BUSINESS LIFE: Business schools focus on making money, not martyrs
By Michael Skapinker
Financial Times; Jan 05, 2005
When Robert Giacalone asked his students at Temple University business school in Philadelphia for examples of morally repellent management behaviour, they struggled to come up with anything. One of his students said: "Well, I suppose you can't kill your subordinates." The class could not agree on anything else they thought was reprehensible.
On another occasion, he asked students whether they would dump carcinogens. On this the class reached consensus: they would do it, because if they did not, someone else would. Prof Giacalone asked whether they wanted to live in such a cynical world. "We already do," they replied.
Prof Giacalone recounts these experiences in the December issue of the Academy of Management's Learning & Education journal as part of an article on who was responsible for producing the leaders of Enron, WorldCom and other scandal-hit companies.
He says many people blamed the business schools. "Over and again I was asked: 'What are you teaching these students?' The implication was not subtle: business faculty were not teaching students ethics and were to blame for the wrongdoing that ravaged society's trust."
He does not believe business schools should take the rap alone. Home is where corporate crooks first imbibe their moral creed. Children's schools do little to curb base behaviour, he adds. Cheating is endemic, and teachers are reluctant to do anything. When challenged, teachers say their students are too young to know better. That is not the real reason they refuse to act, Prof Giacalone says. "It is the fear of costly legal action that quells the deterrence of dishonesty - in a litigious society, students who are too young to know better have parents old enough to call a lawyer."
Not that Prof Giacalone exempts the business schools from blame. All sections of society have to ask what they have contributed to the malaise. Many business schools have attempted to address the problem with ethics courses, which Prof Giacalone sees as the equivalent of trying to halt a plague by administering antibiotics to a few of the sick.
What is needed, he argues, is a radical change in what business schools teach. The problem with business school education is that it has no higher order ideals. It teaches that profit is the sole proof of business success, whether it is achieved by producing drugs that cure cancer or cigarettes that cause it. Business schools have nothing to say about "love, forgiveness, gratitude and hope", none of which can be reduced to money. Business schools have none of the aspirations for society as a whole that medical or engineering schools take for granted. What is needed, he says, is "a transcendent business education for the 21st century".
With this polemic, Prof Giacalone joins a growing group of business professors attacking their schools and what they stand for. The group includes some of the best-known names, including Henry Mintzberg of McGill and Jeffrey Pfeffer of Stanford.
Are they right? Prof Giacalone seems to have had worse luck with his students than other business school professors I have spoken to. Several have said students seem ever-more concerned about proper corporate behaviour; they are demanding not only ethics courses but classes in non-profit management. All the same, Prof Giacalone speaks for many of his colleagues' discomfort with their schools' ethos.
Central to the problem, it seems to me, is that business school professors have made fundamentally different career choices from their students. The professors have chosen to become educators; the students - the few non-profit managers apart - go to business school in the hope of reaching the highest echelons of business. Educators, for the most part, choose their jobs because they want to improve the life chances of the young. Business leaders aim for power, challenge, control and the opportunity to make money. Business school professors may not be badly paid, but, by choosing their careers, they have opted to earn less than their charges.
As to Prof Giacalone's call for a philosophy of business that aims for more than the maximisation of profit, I am all for it - but then I, too, have chosen a profession whose monetary rewards are lower than those enjoyed by most business school graduates.
There is nothing wrong with business schools challenging their students' overly materialistic assumptions. They will still enrol for the courses. But it is likely to have only a marginal effect on how those students behave once they graduate. Whatever they learn at business school, the world after they leave will impose its own demands.
The business school critics may not like the economic system their students enter - one that measures success purely by the generation of shareholder return - but it is the one we have. There are alternatives to the American version of capitalism - the French one, for example, but that has not achieved the US model's worldwide success and has produced its fair share of crooks too.
Business schools can and should invite trade unionists, environmentalists and anti-globalisation campaigners to address their classes. But they will probably achieve more against corruption if they remind students of the consequences of getting caught. Some schools already invite business convicts to speak. According to the New York Times last year, Walter Pavlo, who spent more than 18 months in jail, spoke at the University of California Berkeley's Haas School. But the newspaper also reported that Mr Pavlo expected to earn up to $200,000 a year from his speeches, so he may be more of an inspiration than a deterrent.
A better idea might be for each student to be handcuffed and marched through a jostling mob of his or her classmates filming the event for the evening news. The simulated perp walk? It may be a better weapon against corruption than transcendent business education. michael.skapinker@ft.com
© Copyright The Financial Times Ltd
Welcome to the Professional Class in the 21st Century!
I read this in the New Statesman a few weeks ago. It rang a bell. Adds new meaning to the corporate treadmill.Something to ponder for now.
Those mill owners knew a thing or two
Observations
Raj Persaud
Monday 17th October 2005
Observations on work. By Raj Persaud
The Marxist view of pay strategy "down t'mill" was that bosses extracted
maximum effort from workers by keeping them desperate. Employees, in other
words, were paid just enough to keep them from starvation. It didn't make
sense to pay them so badly they couldn't get out of bed in the morning, but
equally it wasn't smart to pay more than the minimum needed to keep them
turning up at the mill gate each day ready to give their all.
A distant Victorian memory, you may think, except that an American
economist has come up with a model of modern salaried professions which
suggests that the Marxist analysis applies with renewed force in
competitive market places such as, to take one example, the City of London.
According to Alan Day Haight of Bowling Green State University, Ohio,
people in accounting, law, medicine and similar work toil on the verge of
depression or burn-out in much the same way as wage workers once lived on
the edge of starvation.
Haight points out that promotion-track workers in these professions are
motivated largely by hope of advancement to partner or vice-president, or
some other senior post. And given that they basically accept hope as a
means of payment, they are convenient targets for "surplus extraction".
In a typical office, this argument runs, senior professionals benefit from
the long hours put in by junior professionals, and because a little rivalry
makes the juniors more diligent, the partners have an incentive to hire
more than one candidate for each anticipated promotion. But how much more
than one? How much rivalry is enough, from a partner's point of view, to
extract maximum surplus effort?
The Haight answer may seem dismally familiar: there is enough rivalry only
when the junior professionals are suffering from so much promotion anxiety
that they are always on the verge of giving up or burning out.
Haight has modelled the optimum curve for the number of extra hours that
can be extracted from young professionals on the basis of their hopes of
promotion. Maximising hope, he notes, is the key art of the senior partner;
more people must believe they may be promoted than can be promoted.
He therefore concludes that "if staff burn-out did not exist, it would be
necessary to invent it". If junior staff have high morale, in other words,
you must hire more of them until promotion anxiety is sufficiently severe
to extract maximum free labour from juniors. The firm can even afford a few
psychological casualties among the staff because of the returns in
aggregate effort.
The model reminds us that although the modern owner of the means of
production might not exploit workers physically in the manner of the
Victorian mill owner, he or she may be exploiting them emotionally. And
because emotions are less visible than malnutrition or physical exhaustion,
the damage is harder to measure. In other words, the professional workers
of the world may be in chains, even if they can't see the chains to throw
them off.
Raj Persaud is Gresham Professor for Public Understanding of Psychiatry and
consultant psychiatrist at the Maudsley Hospital, London
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