Friday, 27 July 2012

Anglo American - a modern tragedy

I can't help but feel a little sad each time Anglo American CEO Ms. Cynthia Carroll takes the stage. By all account, she's functionally competent and in the main, a decent executive. Even so, she's not family and therein lies the rub. There's no sense of history or culture or an appreciation of the blood, sweat and tears shed by millions of South Africans on whose backbone Anglo currently strides the international sphere. It's also shameful that not a single worthy South African put up his / her hand to lead, what is ostensibly, an AFRICAN company. 

I concede that globalisation has forever changed the face of business. Companies operate across cultural nuance and geographical divide. That's true. Notwithstanding, when The Board fails to elevate or tap into the beating heart or soul of a company the management team will always under-perform. That too is a fact.

Modern management theory measures performance on the basis of an isolated evaluation of a set of financial statements. It is, however, a gross simplification, particularly in the mining industry. A superior operation is not its projection chart or its cash flow statement. It's about it's people and relationships both inter-company and inter-industry. It's also about experience; not at board level but at the coal face. It's a sense of history which drives a culture... Ignoring culture as an old-fashioned premise, at board-level, nullifies the history, negates experience, breaks down relationships and demotivates people.. *As a result production suffers, revenue falls, financial statements reflect the change, projections are cut and wholesale change is instituted from middle-management down.. ; which demotivates people, breaks down relationships, negates experience and nullifies history. Quite candidly, therefore, dismissing the CEO of the platinum division for poor performance when 30% of production is sold to crisis-stricken Europe is callous leadership and is ignorant of experience.

Applying modern management theory to Anglo American we'd note, simplistically of course, a 46% decline in eps. which is an oddity given that commodity prices have declined by an average of 20% over the same period.. There's some slippage thereabouts... I wonder why?

Wednesday, 18 July 2012

What's your legacy?

South Africans and our friends around the globe celebrate the birthday of Mr Nelson Rolihlahla Mandela (aka MADIBA), a Statesman, our National Treasure, a global icon and a gentleman extraordinaire. His is a living legacy, a beacon of hope, past and present and most importantly, proof sufficient that triumph in adversity is the sweetest of them all.

Today's politicians would do well to lead, follow or get out of the way. 

It always seems impossible until it's done - Nelson Mandela

Thursday, 12 July 2012

Minutes to win it...

Buying equity anticipating post-meeting minutes to reflect one or two words in the right order is just about as useful as learning to balance 5 ping-pong balls on your nose. Failing to appreciate that the odds are stacked against the trade is similar to a bout of inconsolable hysteria after failing to bounce a dime into an open-necked bottle at 30 feet.

Hoping against hope that Germany will fund delinquent excess whilst Merkel teeters on the political abyss presumes that PIGS will fly in the middle of July..

There are some fearsome odds we seemingly ignore. $600 trillion approx. is the size of the global derivatives market. Romney vs Obama for the world's most important economy is a David vs David contest. Where's Goliath? Companies have retrenched, are retrenching and will continue to retrench extraordinarily large percentages of their work force. Consumer spending resilience under those conditions is probably ephemeral at best. Internal controls at the world's largest financial institutions are either lax or deliberately misleading. Global youth unemployment, the Arab spring and the Asian Tiger struck low with cat-flu virus are fairly strong signals that all is not well. When 27000 words of legislation regulate the planting of a cabbage, who can honestly claim surprise when the Europeans disagree to disagree?

If Buffett's form holds true, 'risk-on' is just around the corner; the music's stopped and the exit is jammed. Ping-pong anyone?

Wednesday, 11 July 2012

Anti-theft lunch bag fools the playground

Two little boys running mad
Rajoy & Monti; from spendthrift fame
Both little boys thoroughly bad
The rules they break, they play a game

Onto the playground they have run
To steal the lunch off Merkel's mum
Her lunch bag in hand and off they dash
Their celebrations, prematurely rash

The bag wide open, they see the mould
Back to Merkel they must scold
The bag's disguise in mould is sham
Under the plastic is good ham

Wrapped in court for many a week
Merkel's lunch is still her own
Rajoy & Monti will you moan
Off to class they must sneak

Tuesday, 10 July 2012

All Tuckered out

Paul Tucker's testimony to the Treasury Committee was either a masterclass in talking a lot & saying very little or confirmation that just about anybody, with the right 'connections', can ascend to the position of Bank of England deputy governor.  

Either way and what's difficult to comprehend is why someone in Tucker's position would volunteer and publicly affirm, indirectly perhaps, a level of incompetence unbecoming of his position. Even with the benefit of hindsight, it's still difficult to justify Tucker's contention that the BoE had little reason to suspect irregular behavior in the LIBOR market. Minuted evidence from meetings Tucker chaired does, in fact, suggest otherwise. His indefensible contention, when pressed by the committee to answer directly, that he might have 'misinterpreted the signs' as early as 2007, does little to alleviate the negative public opinion.

Whether Tucker's self-preservation instincts motivated a 'massage of the truth' or even if he failed to show up at the LIBOR free-for-all at all, there's little justification or evidence sufficient to restore the level of competence his position demands.   

Wednesday, 4 July 2012

Out of Ashes, An Opportunity!

The rate-fixing scandal is quite simply a systemic cultural failure. London burns and the ramifications are difficult to quantify. Even so, you cannot deny the gift-wrapped opportunity for the US. Opportune US regulators can now, at last, justify / demand or fix associated trade in US dollars. The expected shift in trading and jobs away from London to New York should, if nothing else, convince the global community that Europe's star has waned.

As for the individuals specifically implicated in the so-called rate-fixing scandal, whether they emanate out of Whitehall, the BOE or from the formal financial community only, there are a range of criminal sanctions and punitive guidelines covered by legislation. Deliberate attempts to rig or manipulate interest rates allow for little justification and although there is evidence of unsubstantiated mudslinging, the ramifications for the individuals so implicated, are dire.

In a remarkable quirk of timing, today's testimony by a US-born ex-CEO of a UK bank could denote a banking shift away from London to the US. Free at last?

Wishing our US friends a safe and Happy 4th of July. 

Tuesday, 3 July 2012

London loses its 'Global best practice' tag!

It's not surprising that Barclay's Diamond has resigned. Even so, further scrutiny and full disclosure could well vindicate or indeed confirm his fall from grace. Time will tell. What was a surprise was the reinstatement of Agius as Chairman. It's difficult to comprehend and cynically symptomatic of the financial services industry generally. Then again it would be wholly irresponsible for Barclay's to continue to function without both its CEO and Chairman.

Complicity or collusion is by definition inclusive of other parties which raises a number of important questions. Aside from the corrosive taint hanging over the UK's arcane banking and regulatory industries and the associated reputational risk to London's claim of 'global best practice', the threat to the UK's economic prospects cannot be discounted. Endemic complicity is never victimless. In practice, as a consequence, retail investor abuse is both systematic and common.

If complicity is confirmed, the 'Barclay's-event' mutates into an industry-wide issue which opens up the industry, rather than the company or the individual, to civil claim. The threat of a civil claim must, as a consequence, threaten the balance sheets of the banks involved. You could argue that the banks involved, protecting their cash reserves in fearful anticipation of a fine and or a general civil claim, might not be INCLINED to function appropriately in the retail lending markets. The stifling effect on an already unstable economy in desperate need of stimulus cannot be denied.

THIS IS NOT HOW YOU SUPPORT ECONOMIC GROWTH and or REPAIR the reputational damage to the global financial services industry post the events of 2008.

Monday, 2 July 2012

Shoddy mistreatment of clients & shareholders

It's time and past time to FIRE / DISMISS the executives who either directly or indirectly contribute to market manipulation in any or all its forms and who by virtue of their appointment only hold a mandate from shareholders / clients to exercise oversight with due care and vigilance. Accepting the resignations of these individuals offers an avenue of escape which avoids the social blight they clearly fear most. It's a tacit acceptance of flagrant misconduct and or blatant incompetence both disgraceful and an insult to the market and the service-ethos at large.

A Savile-row tailored suit and a disproportionately high wage does not absolve any individual from negligence, INTERBANK-COLLUSION, malfeasance, misconduct, incompetence or blatant stupidity!

By the way Diamond, Dimon and Agius, aside from your obligations prescribed under fiduciary duty, it's your job to exercise due care, oversight and control! It's time to institute an international civil claim against these (b)ankers directly.