Some good reads from around the web.
I suspect everyone is getting a bit bored of banker bashing again. I am, and I was at it [1] only a couple of weeks ago!
Boredom is not a solution, though. There needs to be change, or financial insiders will continue to capture an undue share of the profits of our capitalist system, while periodically wreaking havoc doing so.
In the lively discussion that followed my latest post, a couple of readers suggested I was unfair for expecting bankers to be less venal, selfish, and self-justifying than the rest of us.
But that’s not the case. I don’t.
My argument against what was once almost banker deification – stretching way back before the financial crisis – was that we don’t give sufficient attention to the fact that they are just like the rest of us!
The ordinariness of bankers implies two important things:
Firstly, there’s no reason why ordinary people should earn superstar salaries for either doing routine work, or for gambling.
Yes, the best should earn a lot when they truly add value, and banking will never be supermarket check-out money. But the market is effectively rigged and anti-competitive, and prospects in banking should be more like they were in the 1960s and 1970s, before deregulation opened the honeypot.
Some in the City compare the best-paid bankers with rock star footballers. The difference is the best footballers are demonstrably better at football than 99.99% of everyone else in the world – as opposed to uniquely having access to the football pitch.
Secondly, the ordinariness of bankers means big banks should have similar incentive structures to other employers, instead of the current heads they win a fortune, tails they win a fortune scenario.
Bonuses should probably be scrapped altogether for most areas of banking. Bank employees could instead invest a portion of what will still be healthy salaries into discounted share schemes, like other office workers. The current system has repeatedly delivered bad outcomes for society and the economy, which shareholders and taxpayers have carried the can for.
Still not convinced? Read the superb indictment of big banking from Buttonwood in The Economist [2] this week.
It points out four things we’ve learned about elite bankers:
1. The laws of supply and demand do not apply.
2. Success is down to personal genius; failure is caused by someone else.
3. What is lucky for an individual trader may be unlucky for the bank as a whole.
4. Resigning can be a retirement plan.
It’s well worth reading in full [2].
p.s. According to the well respected Fixed Income Investor [3], Friday was just “another day in the paradise that is the retail bond market (every new issue has opened at and maintained a premium).” Glad my thoughts on stagging retail bonds [4] are in such good company.
From the blogs
- Don’t let models doom your portfolio – Rick Ferri [5]
- Bond investing 101: Yield curves – Oblivious Investor [6]
- Bond of the week: ICAP 5.5% – Fixed Income Investor [7]
- Experts versus dart-throwing chimps – Investing Caffeine [8]
- The Guardian tells me I’m in poverty – Simple Living in Suffolk [9]
- FTSE 100 Valuation Update: July – Retirement Investing Today [10]
- Household wealth hits £10.3 trillion [PDF] – ONS [11]
- 2% GDP growth would be Nirvana for the UK – David Smith [12]
- Big banks: Totally addicted to debt – The Psy-Fi blog [13]
- Equality vs tax vs big government – Stumbling & Mumbling [14]
Book of the week: Amazon is taking pre-orders for J.K. Rowling’s first novel for adults, The Casual Vacancy [15]
Mainstream media money
- What cutting-edge ship design now looks like – The Economist [16]
- Halifax says houses are most affordable since 2002 – BBC [17]
- Ways to reform the UK savings system – FT [18]
- Meeting care home costs with whole-of-life policies – FT [19]
- Grandlords: More pensioners investing in buy-to-let property – FT [20]
- Three niche ETFs, tracking Pakistan, Bangladesh, and rare earths – FT [21]
- Cheap BoE funding could reduce fixed mortgage rates to 2.7% – Telegraph [22]
- Five ways to save on an iPhone upgrade – Telegraph [23]
- The retirement wealth gap: Which side are you on? – Independent [24]
- Restating the case for the Caledonia investment trust – Independent [25]
- Auto-enrollment pensions: Top-up or pay-cut? – The Guardian [26]
Product of the week: The new five-year fixed mortgage from HSBC [27] is billed as the UK’s cheapest ever rate [28] at 2.99%. But you’ll need a 40% deposit, and there’s a hefty £1,499 arrangement fee.
Like these links? Then get them automatically [29] by email!