The latest news from HSBC (Warning as HSBC profits fall 28%), looks pretty dire, (“oh no! 28% down, jump from the windows“), so I’ll be closing my account then, should I?
Lets put it in context….
- Last year, some chickens came home to roost for people who’d over-leveraged their investments to bolster their lifestyles – a.k.a. The Credit Crunch. This happened to individuals and large financial institutions run by idiots – like Northern Rock,say…
- Soon after, the HSBC bosses are up for a bonus of £120million, even though the bank only made a few billions (actually 10% up!) …
- Now we are told the bank is only going to make a profit of £5200million, for half a year!
Question: So what’s bad about it?
This is the recent profit history for HSBC. Profits have gone up from $7150 million in 2001 to $22710 million in 2007. If the next six months are the same as the headline above, then they’ll make $20400 million for 2008. I’ll just spell this out.
20,400,000,000 United States Dollars!
Now this is a profit. A profit is when you finish off with more money than when you started. Remember, this is after the HSBC has lent the money and had interest and debts paid, after they’ve paid staffing and other running costs. Basically, the same profit as in 2005!
So what’s bad about it? Answer: NOTHING.
Usually, in a bank, the profit is the difference between the interest paid on deposits and the interest received on loans. They don’t need “investment” money for vast capital expenditures like most businesses such as the utilities or petrochemical companies. So they’ve no excuse. The answer and blame lies solely in their hands. See here: HSBC: Half right
It’s all part of:
- the pessimistic reporting put out by people with axes to grind or money to make.
This is in stark contrast to early last year with:
- the optimistic reporting put out by people with axes to grind or money to make.
There’s not much difference is there?
However, it’s not over yet.
Designed as a protection or insurance mechanism ( a bit like payment protection insurance for us mere mortals with no brains), CDS of course relies on the amount of claims staying within manageable limits – exactly the logic behind “flogging debts between banks as investment vehicles” which got everyone in the mess in the first place.
There seems to be no requirement for any of these financial vehicles (sorry, scams), as with normal insurance companies, to carry enough available funds to pay every possible claim, should that ever happen.
However, there is mounting evidence that mortgage defaulters, in their droves, are now just walking away from their debts, as they are allowed to, and then the bank takes possession of a property that no-one wants, no-one can buy and they can’t sell and thus get no income. It’d be laffable except that the monetary sums defaulted will exceed the US money in circulation! Posts like this show the level of interest. (no pun intended)
So if this pans out, there will be too many CDS claims to pay out and thus……….another collapse. As always, the spivs who dreamt up the schemes will be long gone and the “financial experts” in the banks will be revealed as the pile of shit-for-brains that they really are.
Carrying the can at the end of the day will be the national governments, who, (not 😕 ) in the spirit of the free market economy, will suddenly decide to shore up badly managed financial institutions with public money, usually keeping most of the managers in place who cocked it up in the first place. Who pays for it – we do, of course.
It’s funny how Bush et al can go suddenly communist when it suits them.
h t t p://downloads.bbc.co.uk/podcasts/worldservice/docarchive/docarchive_20080729-1638.mp3 (BBC World Service)
So what’s bad about it? Answer: I think that this CDS shit is what’s bothering them at the top but they’re frightened to explain it properly.