PROSPERIS Limited PENNIES
   |
Home
The Management Team Recruitment Pensions Risk Management Service Protection Corporate Services Medical Insurance Mortgages Wealth Management News and Updates Enquiry Forms Testimonials Links Location Map Site Map

'Sached'

April 20th 2010

But for the markets, Goldmans is by far the biggest story in town. It is very difficult to be able to pass informed comment without being part of the SEC investigation team, but the outsiders’ view is that this is a highly significant move. There are those who would argue that Goldmans has been at the heart of the policy-making process since 1998 as the price that year for the bail out of LTCM. An attack on Goldmans for alleged fraud is thus, at least symbolically, the most important signal that the SEC can send Wall Street that the terms of engagement have changed.

There is a residual determination amongst governments and central banks that the investment banks will, at some stage and in some shape or form, have to pay for their part in the dreadful crisis of 2008 and 2009. In the short term, these self same banks have been instrumental in shaping the recovery, but this does not mean that there has been much forgetting or forgiving. The investment banking model of the past decade is very much in the cross hairs of the regulator’s sights and the thought is, if the opening shot is at Goldmans, then as Peter Kay so gloriously said of Engelbert Humperdinck “He’s not playing games, is he”.
 
There are so many ways to spin the volcanic ash and closure of British airspace. The impact on the economy will be important if the closure lasts long through this week and we will soon start to see shortages of certain goods. Term may be delayed, football games rearranged and racing cars stuck in China; but what is really amazing is that an industry so crucial to the operation of the world economy in the grand scheme of things never makes any money.
 
Markets might have taken fright from the Goldmans news on Friday, but the other macro and micro news from last week was really very, very good. Chinese growth is going gangbusters, without any signs of a concomitant inflation problem. Inflation in the US is also as close to non-existent as possible, reinforcing that US rates are staying where they are for a very long time to come. The American reporting season has also got off to a terribly good start. Not only is GE at last looking to a better year to come, but crucially Intel has released an absolutely cracking set of numbers. If the US economy really is recovering, then this has to be manifest in demand for microchips. It is. The next few days will teach us much more as we get to see the updates from IBM, Johnson & Johnson, McD’s, Coke and Microsoft. We shall also learn quite how profitable Goldmans, Citibank and Morgan Stanley have been and how readily they will be able to afford whatever fines may find their way down Wall Street.
 
And Nick Clegg. Is this the traditional 15 minutes of fame, or something that will shape the next Parliament? Suddenly, the remaining televised debates have taken an extra significance (wonderful for advertising rates). We have already seen the predictable aggressive response from both Labour and the Conservatives, which is oddly something that may even add to the newfound popularity of the Liberals. I never thought I would say it, but this is threatening to turn into an interesting election campaign. And that is something that the markets will struggle with – how do they discount the undiscountable? What does Wall Street know of the estimable Mr Clegg? Like their inflation rate, next to nothing.