In place of Repo 105, in recent months the US banking biggies have been practicing Repo58. Repo 105 was a device used by bankrupt Lehman Bros. To hide the extent of its leverage by “selling” debt. Repos are used to borrow money against securities held by a bank. The borrowed money can then be used to buy more securities. This increased the bank’s leverage.
These days, according to The Wall St. Journal, the banking majors have been reducing their repo debt used to fund securities trading right before the end of the reporting month by 42% only to boost it again the day after the photographer leaves the premises. That is because leverage is now a red flag to shareholders and regulators. But it still exists at Citigroup, JP Morgan, BofA, Morgan Stanley, and no doubt other venerable financial institutions throughout the land.
You can tell Harry Potter is a lefty because he wears 1950s National Health Service round eyeglasses, as did John Lennon of the Beatles. So it is not surprising that Harry’s creator, A.J. Rowling, has come out in support of the Labour Party in Britain’s forthcoming election.
Britain is also being roiled by worries about the end of its flag carrier, BA, being merged with Iberia. And by the coming initial public offering that will become the largest quoted overseas listing on the London Exchange, as Indian conglomerate Essar spins off its energy (power plant) sub. This is a really horrible stock idea, by the way, a fast growing utility controlled by two brothers in a country where most people are not connected to the mains. But bringing on the masses of rural India, while necessary for the country, is not necessarily going to be profitable for the grid. Prior Indian power ipo’s all trade below their IPO prices.
But there is good news, and as the half owner of Mudchute Manor I wanted to share it with you. British property values are rising smartly up 13.4% year over year to March. The average London home commanded a price of GBP 376,605 at the end of March, which is more than we paid for our pied-a-terre here nine years ago (just). But of course an average is made up by looking at the palatial residences of Belgravia and comparing them to the slums of Whitechapel or the leafy bourgeois squares of Islington. Our spacious flat in a gated community with river views is not typical of anything. And, no, we cannot lease or rent it out short-term under our building’s rules. It is only for family.
Our nephew and new niece are back from their honeymoon. Now I can tell: they went to St. Lucia, as eco-tourists but with a few tips from Aunt Vivian who was there in Jan. And half our Thai cousins who were here for the wedding have flown back home to troubled Bangkok, about which we have a report from Paul Renaud for paid subscribers below.
