City workers earn record bonuses (WHAT THE ****!!!)

[mattsurf]

I read in the paper on Monday that city bonuses in Q1 were the greatest on record... This is partially down to the massive profits that the city is now making on futures for oil, grain and other commodities

This really ****es me off. The city has f***** the banking sector by lending too much money to people who couldn't pay, as a result global economies are in rapid decline. Now in order to continue to secure their bonuses, 24 year old wizz kids are behaving like pack animals and forcing up the price of oil, grain and other commodities, as a result inflation will go through the roof, interest rates will go up, house prices will crash. And guess what will also happen then, oil prices will crash, nieve investors and pension funds will make massive losses but the d**** who created the mess will fall back on the multi-million pound bonuses and think about how to create a new bubble to screw us all

I think that something needs to be done about how global financial markets are regulated. According to sound economic theory, prices should be regulated by supply and demand. However, financial tools have developed which allow short term prices to be manipulated - creating financial bubbles. These short term inconsitencies between the peceived and real value can generate huge profits (hence bonuses) however, they are not in the long term interest of the global economy, the banks or us, in fact the only people who benefit are the ones receiving the bonuses.

I am very unhappy to pay £1.3 per litre of diesel (will be over £1.40 by end June), however, please consider all those people in the world who are starving to death because of the behaviour in the city - grain has increased by 250% this year, yet this follows record crops last year and many of the worlds grain reserves being in a good position.

I am not a communist, however, I believe that the G8 (or at least the leaders of the largest economies) need to agree collectively how to deal with this situation

 

[jberks]

I am not a communist, however, I believe that the G8 (or at least the leaders of the largest economies) need to agree collectively how to deal with this situation

Given that their paymasters are the city and that 1/3 of all taxes in the UK now come from there, I can't see our government doing much. Oil and food prices should be set by a worldwide cartel of the G8, Opec etc and not by the market though.

Your not a communist comment amused me. This is a Mercedes Benz Owners forum after all. Not exactly the 'Peoples' mode of transport

 

[Richard Moakes]

Could not agree more, the City practices of 'Hedging' and 'Short Selling' are downright immoral when applied to commodities. They are dubious when applied to shares, particularly as they can damage companies and cause job losses, but thats the risk with any publicly listed company, but when applied to commodities, they are crazy.

People in the 3rd world starving whilst City analysts and brokers take home huge bonuses, that has to change!

 

[PaulMdx]

Oil and food prices should be set by a worldwide cartel of the G8, Opec etc and not by the market though.

How do you propose to set food prices given such widely varying economies?

the City practices of 'Hedging' and 'Short Selling' are downright immoral when applied to commodities.

How is hedging immoral?

 

[jaymanek]

the crash has been predicted by the city for ages.. they have been prepared and made money from it.. remember investment banks have lots of departments... if one makes a loss, the other 99 will mint it... it all balances out for large operators and they always make money..

I used to work for JPMorgan...

 

[Myros]

What was it Napoleon said

" God is on the side of the big battalions". I suppose it depends on how you define it all. I've had my doubts about capitalism for a while, but are the alternatives traditionally on offer any better ( tyranny, communism, dictatorship etc)
Anyway, just because owning a Merc takes a certain amount of cash, apparently, it doesn't mean we ignore the plight of others. It might be us tomorrow, god forbid.

 

[mattsurf]

the crash has been predicted by the city for ages.. they have been prepared and made money from it.. remember investment banks have lots of departments... if one makes a loss, the other 99 will mint it... it all balances out for large operators and they always make money..

I used to work for JPMorgan...

But what really sucks is that the Bank of England has just offered banks a "free" loan of 50 billion and immediately 14 Billion goes to pay for the Q1 bonus - BTW the average bonus for a finance industry worker in the city for the first quarter was £12,500 - which is £50,000pa - this is the average!!

Bonus bear no relationship to performance - and a significant chunk of this money comes out of a pot which should be reinvested in pensions etc and not be thrown around to a few gready underperfoming managers who like to gamble with our cash

I recently read a report which stated that over the past 5 years 20,000 people in the city have received bonuses of over £1m - this is obscene

I have worked as a management consultant and am now a supply chain director of a global manufacturing company, I just cannot understand how any industry can throw that type of cash around - especially as they produce nothing.

I just do not believe that the people in financial services are so good that they deserve this type of salary

 

[PeterCLK]

I've worked in manufacturing for 30 years and most of the people in financial services would not "cut the mustard" to earn comparably high salaries in industry. I'm not saying they ar ebad but just overpaid for their performance.

I remember the 70's when the stock market fell to 250 - it's all cyclical.
Back then I drove an Austin A40 so I can't complain(mind you I was only 19).

All Labour governments eventually run out of money - my current grouse is where does all the tax money go?

Also, taxes have become "unfair" - i.e many recently introduced are retrospective so decisions made by individuals in good faith in the past are now being penalised - which takes me nicely to road tax.

Instead of applying the new rates to new vehicles only Darling Alistair is making all vehicle owners pay the new rate - for cars going back to 2001. Grossly unfair. Your Merc is now worth less.

 

[jberks]

All Labour governments eventually run out of money - my current grouse is where does all the tax money go?

I've just been handed a book called "Squandered" by David Craig. I assume what is in it is true otherwise he'd be sued for slander (or is it libel?) It pretty much explains why taxes are through the roof, the govt is out of money and ideas and we're all stuffed.

 

[jberks]

Instead of applying the new rates to new vehicles only Darling Alistair is making all vehicle owners pay the new rate - for cars going back to 2001. Grossly unfair. Your Merc is now worth less.

I hear that they are being forced into a uturn over this one too - so maybe a bit of good news for some.

 

[Richard Moakes]

How do you propose to set food prices given such widely varying economies?


How is hedging immoral?

Say oil is currently $130 a barrel, and a hedge fund buys lets say 100 million barrels for delivery in 3 months time at $130. It is in their interest to force oil to rise above $130 in the next 3 months. Sometimes just by placing a large order they can scare the market into a perceived shortage of oil. So let's say by rumouring and scaremongering they raise it to $150 in that period, they can then sell it to someone else for lets say $145 and never actually take delivery.

So by doing nothing other than 'assisting' the price upwards they make a clear profit of $15 per barrel ordered.

Meanwhile everyone else suffers the increased price, IMHO, thats immoral, they gamble, they take the profit, we lose

 

[RedDog]

I've just been handed a book called "Squandered" by David Craig. I assume what is in it is true otherwise he'd be sued for slander (or is it libel?) .

...............If its spoken then its slander. If its written down then its libel.

 

[PaulMdx]

Say oil is currently $130 a barrel, and a hedge fund buys lets say 100 million barrels for delivery in 3 months time at $130.

I see where you're coming from and I agree with your sentiment, but technically you assume they're buying the commodities rather than derivatives. According to wordnet:

Hedge: "technique designed to reduce or eliminate financial risk'

My understanding is that it usually involves buying call/put options to counter moves in the market. In this case a hedge wouldn't actually affect the market.

 

[Richard Moakes]

I see where you're coming from and I agree with your sentiment, but technically you assume they're buying the commodities rather than derivatives. According to wordnet:

Hedge: "technique designed to reduce or eliminate financial risk'

My understanding is that it usually involves buying call/put options to counter moves in the market. In this case a hedge wouldn't actually affect the market.

Indeed, hedging was designed to eliminate risk in commodity price moves, and I have no problem with a company such as British Airways hedging AVGAS for years ahead, it's good business sense.

It's when the city boys latch onto this, as they have done, that the trouble starts and commodities rise in price due to 'perceived' shortages, rather than real ones.

 

[GMK]

Indeed, hedging was designed to eliminate risk in commodity price moves, and I have no problem with a company such as British Airways hedging AVGAS for years ahead, it's good business sense.

It's when the city boys latch onto this, as they have done, that the trouble starts and commodities rise in price due to 'perceived' shortages, rather than real ones.

Agree with you Richard. And remember that the FSA will and does crack down on market abuse, eg the rumours falsely spread about HBoS a couple of months ago, which caused share prices to tumble. Bit unfair to generalise all city workers as carrying out this behaviour

Hedging is an important financial instrument and it helps to dampen market volatility; one of the reasons our pension funds don't go up and down like a yo-yo every day

the UK has one of the strongest financial services industries in the world (RBS, for example, is the 34th largest organisation on the planet), and most of the bonuses are linked to profits generated. Given the steady decline in UK manufacturing and agricultural output/employment, maybe we should be happy another industry is able to keep us on the world map?

 

[crammy69]

The thing is, for every buyer of a hedge there has to be a seller... therefore for every "whizz kid" buying calls or even forward contracts for the underlying commodity, there MUST be someone who is selling!. The move in oil is no doubt aided by speculators,hedge funds and the like, but if that was purely it, it wont last long, as history shows..

In 1973, the Hunt family of Texas, possibly the richest family in America at the time, decided to buy precious metals as a hedge against inflation. Gold could not be held by private citizens at that time, so the Hunts began to buy silver in enormous quantity.

In 1979 the sons of patriarch H.L. Hunt, Nelson Bunker and William Herbert, together with some wealthy Arabs, formed a silver pool. In a short period of time they had amassed more than 200 million ounces of silver, equivalent to half the world's deliverable supply.

When the Hunt's had begun accumulating silver back in 1973 the price was in the $1.95 / ounce range. Early in '79, the price was about $5. Late '79 / early '80 the price was in the $50's, peaking at $54.

Once the silver market was cornered, outsiders joined the chase but a combination of changed trading rules on the New York Metals Market (COMEX) and the intervention of the Federal Reserve put an end to the game. The price began to slide, culminating in a 50% one-day decline on March 27, 1980 as the price plummeted from $21.62 to $10.80.

The collapse of the silver market meant countless losses for speculators. The Hunt brothers declared bankruptcy. By 1987 their liabilities had grown to nearly $2.5 billion against assets of $1.5 billion. In August of 1988 the Hunts were convicted of conspiring to manipulate the market.


As regards city bonuses, when they say average in the 1st quarter, normally city bonuses are paid once a year, so that £12,500 is it not x4, they wont get a bonus in every quarter!.

 

[coxyhog]

Indeed, hedging was designed to eliminate risk in commodity price moves, and I have no problem with a company such as British Airways hedging AVGAS for years ahead, it's good business sense.

It's when the city boys latch onto this, as they have done, that the trouble starts and commodities rise in price due to 'perceived' shortages, rather than real ones.

I don't think even think even BA would be that stupid(although I'm not so sure)AVGAS = aviation gasolene = piston engines!

 

[JEZ.S320L]

......Meanwhile everyone else suffers the increased price, IMHO, thats immoral, they gamble, they take the profit, we lose

Conversely - the price decreases, they've gamble, they take the loss, we win :grin:

Ever heard of a Betting Shop going bankrupt? - no, neither have I. Plenty of punters have though.!!

 

[Richard Moakes]

I don't think even think even BA would be that stupid(although I'm not so sure)AVGAS = aviation gasolene = piston engines!

Picky Picky

Ok, so it should have been Kerosene for their jet engines? Better?

 

[st4]

Speculation on oil seems awfully self defeating. Its the one commodity that the western world is built on, playing with its price seems like playing with fire.

The financial sector was critised with its renumeration practices as it encourages people to take rash risks to make big money=big bonuses. However thats the way the banks wish to renumerate then thats fine. Its not half bad for the UK economy.

I work in investment admin but don't see the big bonuses, but I don't play with money.