Saturday, August 6, 2011

Market Turmoil - Who Profits Out Of Our Misery? - Tory Hedge Funds

The financial markets are once again in turmoil, billions being wiped off of shares and pensions being adversely affected, who profits?

On Wednesday 9th February 2011, George Osborne told the House of Commons "we will make sure we learn every lesson that needs to be learned – so that this [the financial crisis] never happens again".

If this is the case then why is George Osborne and the Treasury so reluctant to get rid of short selling and naked short selling?

Most people obtain shares or bonds or other securities in the hope that their value will rise. Short sellers on the other hand hope their price will fall. They might borrow, for instance, 10,000 shares and sell them for £1 a piece. Then they wait and hope that the value collapses. If they're in luck, and the share price halves, for instance, they can buy the same number as they sold for 50p each. They return the shares to the broker who lent them, and pocket £5,000 (minus fees).

With naked short selling. sellers not only don't own the assets they're selling, they haven't even borrowed them either, all they are doing is selling  a promise of shares, of which they hope the price falls, then they try to buy the shares they've sold. They are in  effect selling securities that don't yet exist. Naked shorting can grant short sellers opportunities to wreck companies and economies, they do this by flooding the market with low-cost ghosts. 
Particular problems can arise with "naked" short selling and CDS, which involves selling shares you don't own or taking out insurance on an instrument you don't own - it's a bit like taking out insurance on your neighbour's house, giving you the incentive to burn it down and collect the insurance. (Credit Default Swaps (CDS) is a form of government debt insurance)
ie When Greece had problems, investors also rushed to buy  CDS, (including investors who did not even own Greek bonds), but who would still get paid in the event of a default. This in turn causes greater demand for CDS and this means higher prices for this form of insurance, this in turn makes the bonds seem riskier than they actually are, thus forcing higher interest rates on the government and hurting the economy.

For example, when the US financial system wobbled and everyone expected an implosion, they rushed to sell bank shares. Short sellers borrowed shares and dumped them on the market leading to large price drops, fostering instability and contagion. The US prohibited short selling of bank shares for a while

Short selling was blamed for the demise of banks such as Lehman Brothers, Merrill Lynch and HBoS.
Now almost every country condemns naked short selling and wants it banned because of the huge risks it presents to the economy. It has been prohibited in the US, Japan, Hong Kong, Australia and Brazil: ( none of which are renowned for undue regulation of markets). The European parliament has drafted a directive to bring it to an end within the EU. However, there is one group frantically seeking to protect naked shorting and strangle the directive: the British Treasury, and Conservative MEPs acting on its instructions.

At a committee meeting in the European parliament in February 2011 one Tory MEP Syed Kamall protested vehemently against the ban, insisting his position "reflects that within the Tory government". The Treasury confirmed this: "The UK does not support permanent restrictions on the uncovered short sales of either equities or sovereign debt … we believe it will do much to impair liquidity." Tory MEPs will be instructed by the whips to oppose the ban when they vote on 28 February. The UK government will then oppose it in the European council.

In March 2011 -A new EU directive places conditions on the use of credit default swaps (CDS)  -. Read here EU Parliament Legislative Observatory.
The vote was taken by the European Parliament's Monetary and Economic Affairs Committee.

However, the practice of short selling and naked short selling has not been banned, just restricted.

Member States adopted in May their version of the text. This text waters down the initial proposal of the European Commission. The restrictions on naked short selling are considerably softened and the powers of the European supervision authority (ESMA) are limited. Short Selling Regulation

September 2008 -  Just before the practice of naked short selling was temporarily banned in 2008 it emerges that David Cameron had  taken large donations from hedge-fund managers whose firms placed bets short-selling shares in some of Britain’s crisis-hit banks. He accepted almost £2m from hedge-fund managers who for £50.000 get membership of an exclusive dining club reserved for financial backers of the Conservative party.
Big donors of which Six leading hedge-fund managers are eligible to automatic membership of the "Leader's Club" where they get exclusive access to Cameron.
Members of the group are promised that they will be ‘kept close to policy developments and meet with David Cameron several times a year at small 'leader's' dinners or lunches’.
Its activities are shrouded in secrecy. Its existence was not even acknowledged on the party’s website until after a Channel 4 documentary and the Daily Mail newspaper made enquiries about its membership.

Meet Some Tory "Doning" Hedge Funders and City Bankers:

John Nash - The Hedgie - is also a founder of City firm Sovereign Capital and is chairman of Care UK -Tory Donor, donated £750.000 to Tories and £22.000 to Health secretary,Andrew Lansley's office.

Michael Spencer - Short selling shares in Bradford & Bingly when it was collapsing in 2008 - Donated through his company IPLG Ktd; Former Tory Treasurer, Cameron made him Treasurer against advice but was forced to sideline him after negative press coverage about his financial dealings. Criticised for advising several local authorities to invest heavily in Icelandic banks shortly before they collapsed. Fined £490.000 by the FSA in 2010.

Michael Hintze -   Manages Hedge Fund  Donated £660.000 To the Tories.

Pierre Lagrange and wife Catherine -  donated £50.000 to Tories Mr Lagrange, one of two managers of GLG, had paid himself £400million after using complex financial instruments to make money in the global downturn
The company has previously paid more than £1.5million to American authorities to settle claims of illegal short-selling, without admitting or denying the allegations. £21 Million house in David Cameron's Oxfordshire constituency. Was forced to declare his company’s ‘short’ position on Bradford & Bingley, along with Mr Hintze’s outfit CQS, after the Financial Services Authority (FSA) ordered institutions to do so.
Paul Ruddock  - Lansdowne Partners donated £260.000 to Tories Lansdowne is reported to have made £100million by betting that Northern Rock would collapse and has helped to drive down the value of Barclays by selling shares in the bank worth £151million in recent months.

David Craigen  - Lansdowne Partners £260.000 to Tories -

Andrew Cook - a millionaire Tory donor, who successfully lobbied for the cancellation of a government loan to a promising engineering company, admitted he had wanted to invest in it himself. The Tories' largest donor in Yorkshire, who subsidised David Cameron's flights in opposition to the tune of £54,000 – also donated  £750.000 to Tory coffers.

Jon Wood - Swiss-resident, The controversial hedge fund manager who gave £500,000 to the Tories and has faced questions about his tax status last night after official records suggested that he is resident in Switzerland. Millionaire Jon Wood  caused controversy when it was alleged he did not pay tax in the UK until around 2010.Mr Wood is British, and even managed to sign himself on to the electoral roll a fortnight before making his donation. Wood, a former star UBS trader who founded the hedge fund SRM Global, gave £50,000 to the NOtoAV campaign. He was the biggest shareholder in Northern Rock when it collapsed and he later tried to sue the then [Labour] government over its handling of the bank's nationalisation. He described the government's taking of controlling stakes in Lloyds and Royal Bank of Scotland as "theft"!!!
Louis Bacon - An American hedge fund billionaire was behind £250,000 of donations to the Conservative Party, it has emerged.
The Tories accepted the money from a firm run by Mr Bacon who has luxury homes in New York, the Bahamas, Colorado and London. Mr Bacon's hedge fund - which aims to make huge profits quickly for investors by trading on financial markets worldwide - was fined £16 million in April by the U.S. authorities over charges that a former manager tried to manipulate market prices for platinum. In Mr bacon's case, it is not even clear if American Mr Bacon, 54, has the right to be on the electoral roll. In information released by the Electoral Commission show that it was Moore Europe Capital Management Ltd - Mr Bacon's middle name is Moore - which gave the Tories £200,000 in June, on top of £50,000 [donation]. Documents at Companies House show that the parent company of Moore Europe Capital Management Ltd is Moore Capital Holdings in America - which is 'controlled by L M Bacon'. His hedge fund has given him a reputed personal fortune of £1.1billion, which would make him the 49th richest person in Britain. One of his London traders was arrested as part of a Financial Service Authority investigation into insider trading.

Abdul Majid-Jafar - Donated £55.000 - Executive Director, Crescent Petroleum. United Arab Emirates

Henry Angest - Swiss born Chairman and Chief Executive who donated through *Arbuthnot* Banking Group plc. Loaned £5.5 million to the Conservative party - Lot 20 in the Tory Fund raiser Black and White ball was a week's internship which went for £30.000

Peter Cruddas and wife Fiona - Donated £400.000 to No campaign.
Founder of CMC Markets, said to be the richest man in the City. Donated around £200,000 to the Conservative party in 2009. His wife Fiona is also a dedicated Conservative fundraiser.

Michael Farmer - £100.000 to No Campaign - Hedge fund founder who donated £2.3m to the Tories, making him a regular fixture on the list of Britain's biggest political donors.

FIL Investment Management Ltd - Fidelity – city brokerage company. - Two six-figure donations to the Conservatives were from businesses that appear to be linked to the fund management giant Fidelity, with £355,000 from FIL Investment Management and £345,000 from Fidelity Investment. Its political affiliations have caused disquiet among investor groups in the past, but the group is not listed on the UK stock exchange so there is no requirement for shareholder approval FIL also donated £50.000 to no campaign.

BSN Capital Partners, a hedge fund that is an associate company of Icap, gave the Tories £170,000.

James Lyle  - Financier, Hedge Fund manager. Has donated upwards of £500.000 to the Conservatives. Also donated £50.000 to NO campaign.

Christopher Rokos - Founder of the Brevan Howard Hedge Fund - One of the Conservatives’ city backers,  a millionaire fund manager, gave the Conservatives £400.850 - Also donated £30.000 to no campaign.

Lord (Stanley) Fink - Hedge fund manager, co-treasurer of Conservative party. recently ennobled by David Cameron. A former chief executive of hedge fund operator Man Group, his personal worth is put at £100 million has donated £1.945.141 also donated £28.000 to NO campaign.
Adrian Beecroft - a well-known figure in the venture capital industry. - Donated £537.076  The venture capitalist, 63, co founded Apax Partners and has an estimated £85m fortune
One of the three founders of private equity firm Apax Partners, he now chairs Dawn Capital and owns four Aston Martins.

David Rowland - Donated £4.031.016 - A financier and property investor worth £730m who is estimated to be the 25th richest man in Britain.

George Magan - Donated to the Tories £485.000 A financier and dealmaker aged 64 who pocketed an estimated £20m from his first business, Hambro Magan.

Jeremy Hosking - co-founder and investment portfolio manager for private investment fund Marathon. Has 25% share holding in Crystal Palace F.C.. Hosking was ranked number 333 on the Sunday Times Rich List in 2009, with a value of £170M  In December 2009, Hosking donated £30,000 for funding research support, to Conservative MP David Davis.  In Q42009, Hosking donated £125,000 to Conservatives. Also donated £25,000 to no campaign.

Hugh Sloane - Number 291 in The Sunday Times rich list 2009. One of the founders of hedge fund Sloane Robinson. Sloane’s compensation level exceeds even the reported £50 Million “bonus” paid to a Goldman Sachs director and the huge compensation package of Roger Jenkins, leader of Barclays Capital. Sloane Robinson has a Cayman Islands base. Sloane donated >£100,000 to Conservatives in 2008 Also donated £15.000 to No campaign in 2011.

Peter Hargreaves - Founder and Chief Executive of broker and investment adviser Hargreaves Lansdown, Mr Hargreaves was ranked No 111 in The Sunday Times Rich List, with a personal fortune put at £570 million.   Supporter of Thatcher, critical of Cameron and Con-Dem coalition. Also donated £10.000 to no campaign.

David Mayhew - Tory donor - Ole Etonian-  the former chairman of Cazenove - known as the Queen's stockbroker, which was taken over by JP Morgan in 2001 - Donated £52.000 to the Tories – gave £30,000 to the NO to AV campaign. Charged in the Guiness share support scandal in the late 80's but the case collapsed.

Andrew Sells -  Venture capitalist - Treasurer Policy Exchange Think Tank (David Cameron's favourite think tank!) - donated £85 .000 to Tories and also donate £25.000 to no campaign.

Naguib Kheraj - the former Barclays finance director  also donated £10,000.

Jeremy Isaacs - Heads his own investment firm
Stepped down from running Lehman Brothers’ European operations just before the crash. Now runs his own investment firm with ex-colleague Roger Nagioff, who was head of Lehmans’ fixed income division. Has been a big party donor. Donated over £345.000 to Tories
Paul Killick- Killik & Co LLP Stockbroker - Donated £78.000 to Tories - also donated £25,000 to no campaign.
Richard Hoare - of Hoare banking Industry -  donated £65.000 to Tories in 2010 The Tories also have an outstanding loan of £150.000 with C. Hoare & Co.

Robert (Robin) Fleming - member of Fleming Banking Industry -  One of Tory's biggest donors, donated £1.7 million also donated £10.000 to No campaign. Mr Fleming was also a personal donor to David Cameron when he was Shadow Home Secretary.
Alex Knaster, a Russian financier, who set up London-based Pamplona Capital Management with $1bn to help Russian firms invest overseas - Gave £50.000 to Cameron's No campaign

Shore Capital -Stockbroking and corporate finance group Shore Capital has given £25,000 to the Tories No campaign.
Crispin Odey  - Odey Asset Management Group  has donated £20,000 to No campaign. Odey, a former Barings banker, is one of London's leading hedge fund managers who awarded himself a £28m bonus in 2008 after predicting that the banks would fall and shorting UK bank stocks. Odey is closely involved with the Conservatives and is married to Nichola Pease, who belongs to one of the Barclays founding families and is the deputy chairman of private wealth group JO Hambro. Like many hedge funders, he has threatened to relocate to avoid the 50% tax rate

Nick Finegold - who pocketed some £10m last year when he sold his share-dealing brokerage Execution Noble to Banco Espirito Santo de Investimento and became a vice-chairman of the Portuguese investment bank. Gave £10.000 to No campaign.
Michael-Alen Buckley  - Chairman, RAB Capital
Founded the hedge fund with Phillip Richards on 1 April 1999. The company was floated in 2004, getting high-profile backers such as Lakshmi Mittal, although profits have faltered in the wake of the economic downturn. Has donated to the party

So who is possibly benefiting out of this latest round of market turbulence?

The country is suffering wage cuts and freezes, reduced working hours and tax rises and people are losing their jobs while Tory financial backing hedge funders in the City laugh all the way to the bank.

The extent to which the Conservatives have been bankrolled by City fatcats is astonishing.
Individual donations from bankers and hedge "funders" make up more than HALF of funding directly into Conservative coffers and then more besides to individual MPs constituency offices.
Since Mr Cameron became leader, gifts to the Tories from the Square Mile have more than doubled, making George Osborne’s rollover on bonuses look biased and further fuelling claims his Government is in hock to big financiers.

The British government, while imposing extra taxes and devastating cuts on ordinary citizens, has quietly engineered a new tax exemption for the banks and corporations, which also encourages these businesses to shift some of their operations overseas.

The study, by the Bureau of Investigative ­Journalism, found that the Tories received £42,756,398 from financiers in the past six years.
Some 58.5% – £9,150,064 – of Tory donations in 2010 came from the City, with 60 fatcats handing over £50,000 of their own cash – enough to buy them a face-to-face meeting with the PM. The top 10 City donors gave £13.1million over five years, and two of them – Stanley Fink and George Magan – were made peers in 2010.

Figures at the heart of the financial collapse also donated hefty sums. Jeremy Isaacs, the former head of Lehman Brothers in Europe and Asia, gave £190,000 over five years and Roger Nagioff, former head of fixed trading at the bank, donated £180,000.
The Conservative Party has become reliant on bankers, hedge fund managers and private equity moguls for more than half its annual income, an independent analysis of Tory finances has revealed. Since David Cameron became Conservative leader in December 2005, the amount of money the City has given to bankroll the Tories has gone up fourfold, to £11.4m a year.
So it probably won't be especially easy for David Cameron to bat away as irrelevant the statistics published today by the independent Bureau of Investigative Journalism of the extent to which Conservative Party Central Office has become dependent on cash donations from companies and individuals working in financial services.

When a party becomes as dependent as the Tory Party has apparently become on a group of individuals and institutions with a number of identifiable collective interests, how can David Cameron say he is governing for all and that  allegedly "we're all in this together"?
The world's economy is in virtual meltdown and the UK economy is going down the gurgler and the prime minister is away on his third luxury foreign holiday of the year - chancellor George Osborne is in LA staying at a hotel which costs £1100 per night and the Deputy PM was in Spain, but has now travelled to France as part of his holiday. For all three of our leaders to be out of the country at this time is either fecklessly incompetent planning or it is breathtaking arrogance and complacency, or it is probably both - whatever it is, they should have cut their holidays short and returned to the UK to deal with these problems, it is not good enough to carry on with their luxurious  holidays abroad while billions is being wiped off of pensions and people are losing their jobs and two major high street banks have reported billions in losses, which is the start of another banking crisis, they should be home here leading and sorting it out. However, for that to be done it would mean getting tough with the banks and financial markets and as the Tories are in hock to all of these people, that is hardly likely to happen any time soon.

 Over  the last five years,  City bankers and hedge funders and City analysts etc has donated more than £42m to the Conservative party. How can we operate as a country when we have a government which is virtually financially reliant on the bankers and hedge funders that caused this toxic debt crisis and global financial recession in the first place? Their decision and policy making is flawed and compromised as we have seen with the total joke that is Osborne's "Project Merlin". Banks are not lending, they are taking absolutely no notice of Merlin (or Osborne) and while it may have escaped the holidaying chancellor Osborne this week, two of the major high street banks in the scheme; Lloyds and RBS have reported billions of pounds in losses this week. Last year while still under Labour's measures all these banks actually reported profits, so something major has gone wrong with the economy. "George 'fiddles' while the UK burns"

The UK Conservative government has opened itself up to accusations of incompetence, corruption, sleaze and utter recklessness and they should be here answering their critics and running the country.


N said...

Brilliant, although horrifying, article. This is stuff the mainstream media should be highlighting.

There needs to be a campaign to tackle the corrupt city tycoons and how servile the Tories are to them. I really hope the Labour leadership is brave enough to take this on. After all, Labour - specifically Watson and Bryant - took on News International when all the naysayers thought they didn't stand a chance.

Anonymous said...

If it looks corrupt then it is corrupt!
I noted a number of criminals donate to the Tories!
Now forgive me if i am wrong but that's illegal is it not!


Gracie Samuels said...

Both correct and N, I too expect Labour to take on the City when they return to power, in much the same way they took on the right wing press, because something must be done about the way this country does business and iot is hight time that all the "secret handshakes" stopped. Capitalism as it stands now has failed us, it is completely corrupt and it does not work, we need a new system maybe something based on the Robin Hood tax and green economy. I am not proposing "communism" but something radical has to be done.

Gracie Samuels said...

I just wrote that I thought a Robin Hood tax will be beneficial and I see that Left Foot Forward is saying this would lead to calmer markets and I agree I think it very well could. One thing for certain, what we are doing now is not working!

Robert said...

"I really hope the Labour leadership is brave enough to take this on."

I really hope Beyonce sees sense and leaves Jay Z for me too but it aint gonna happen.

Robert said...

"After all, Labour - specifically Watson and Bryant - took on News International when all the naysayers thought they didn't stand a chance."

Let's not forget though they would have got nowhere if it wasn't for the Milly Dowler phone hacking and email deletion, an act so horrifying and disgusting that even the Great British public couldn't stomach it and turn a blind eye to it, or blame some immigrants or benefit scroungers for, Britain would still be Rupert Murdoch's personal fiefdom, politicians of all stripes would still be grovelling before him and he would now have full control of BskyB and British TV would have its very own Fox news.

Gracie Samuels said...

With your selective amnesia Robert you seem to haver forgotten that it was Labour MPs Tom Watson and latterly Chris Bryant along with the Guardian that helped expose this. Watson had been trying for years.

It took guts to do what Miliband did, if it backfired (and it still may) then he would be taken to pieces in the Tory supporting right wing press. However, as I have said before, Miliband owes Murdoch nothing and he stood up and was counted and it was a good job he did, because the gutless wonder Cameron was still desperately trying to brush it all back under the carpet. Probably scared of his "Chipping Norton" connections being revealed.

For someone that professes he supports/supported labour you seem to have one track mind, you specifically come here to trash labour, might I remind you that Labour are not in government.

Gracie Samuels said...

Oh and one other thing, this particular article is about the Tories and their connections to hedge funds and investment bankers etc and how it has left them hopelessly compromised and open to accusations of corruption it is not meant for phone hacking, that discussion is on one of the other blogs. If I didn't know you better I would think that you were trying to divert attention away from this "corrupt" government.

definatelycharlie said...

Brilliant article.
But Mr Miliband must make a big noise about all these points.
The coalition are getting away with scapegoating the most vulnerable in the society,and Miliband barely complains.In fact,he's taken notice of the focus group findings telling him that Labour is too associated with the poor.
So,he has to sound and act tough
about people on benefits.I expect it goes down well with the Mail,but it is not exactly brave.
Not exactly brave.

Gracie Samuels said...

Robert you are most welcome to enter your hacking comments on the correct thread thanks.

Gracie x

Anonymous said...

It's been this way for years Gracie these people deliberately set out to either confuse the money markets or to bring about their collapse such is their evilness

The politicians we have today seam very reluctant or intellectually unable to highlight their misdemeanour's to bring about their downfall