Morning:
8°c
There's nothing funny about the Bernie Madoff scandal. Nothing at all. Except it's hard to shake the feeling that some of his victims got exactly what they voted for.
It's not only that his investors seemed to think their wealth entitled them to greater investment returns than anyone has ever achieved in history. Nor that some of them, it's said, assumed that he was only getting those returns thanks to insider trading, a strategy with which they were perfectly happy.
It's just that it seems a fair bet that many, if not most, Madoff investors voted for Ronald Reagan and both George Bushes, heartily believing that free enterprise uninhibited by proper oversight would be good for them, if not everyone else.
Regulators were stripped of their power and starved of funds, while Wall Street was cheered on. This crowd wanted the government to be as small as possible - until it turned out to be too small to prevent them from being collectively defrauded of $50 billion.
Now they'd like it to be much bigger - they'd like compensation, in some cases from banks that advised them to invest with Madoff and which are now in receipt of public funding.
Many Madoff investors look like the sort of people who go to great lengths to pay as little tax as possible, thereby starving the government of funds it could use to, say, investigate fraudsters. Rather than pay tax, they preferred to brag about their philanthropic work.
In their minds, Wall Street was a great wealth-creation machine - for them at least - and doing anything to curb its worst excesses, like regulating it properly and at considerable expense, would be to trample on their ability to do whatever they want.
Mort Zuckerman is typical. The mogul whose charitable fund was caught up in the Madoff Ponzi scheme is (still) one of the richest Americans, thanks to media and property interests.
From his perch as publisher of the New York Daily News (pretty good tabloid) and editor-in-chief of US News & World Report (awful monthly), Zuckerman regularly sermonises on conservative causes, while funnelling money to Republican politicians.
A longtime pal of Reagan, he was once described in The New Yorker as having "in his manner a trace of Montgomery Burns" - the miserly industrialist from The Simpsons.
He wanted the government off his back - a wish that was fulfilled, though at the price of ensuring it wasn't on Madoff's either. As far as I know, Zuckerman isn't asking for a government-funded bailout of his Madoff losses. But I wonder whether he's adjusted his views on the need for a tougher Securities and Exchange Commission.
The problem with good regulation is that you can't see it, so it just looks like an expense. If Wall Street had a regulator worthy of the name, it might have started delving into Madoff 40 years ago, and found out the truth about the curious character with the obscure auditors.
Madoff would have been put out of business and banned from the world of investment. His clients would have invested somewhere safer, leaving them free to lounge in Connecticut country clubs bitching about the damn government.
The SEC has always been a paper tiger, a place where underpaid and under-resourced officials lamely try to keep pace with the best lawyers in town, who are inevitably working for the other side.
The Department of Justice does a viciously effective job of beating people up after they've been caught, but that's not regulation, that's a mixture of stable bolting and vengeance.
On both sides of the Atlantic, proper financial regulation is not some impossible dream. We'd just have to agree to pay for it.
Fiji diamond business gets a little murky
An oddity from the small-cap mining world. Canadian investor Walter Berukoff had a dispute with Templar Minerals last year, claiming it owed him £8.5 million for the sale of a mine in Fiji.
Templar said it would pay using 200 million shares in River Diamonds, which has changed its name to Vatukoula. It appears to have paid up, but doesn't seem to have announced this.
The Vatukoula share register from last August has Templar Minerals as a major holder with 250 million shares.That same register shows Templar now holds just 50 million shares, while Atlantic Law (Berukoff) owns 343 million shares, up from 143 million previously.
So it seems clear Templar has handed over what amounts to 80% of its assets. Not disclosing this may be an oversight, but getting clarification was tricky because Templar isn't returning phone calls, at least not mine.
The shares are down from a high of 7p, yesterday slipping 0.025p to 0.775p.Curious.
Spectre of Stella stalks lager whose price is just too frothy
The barman was quizzical and amused. “Are you sure you want Peroni? Only it's £4.20.”
Four pounds twenty for a pint of lager? What's cheaper? “Everything,” he said.
SABMiller is desperate to ensure that its “premium” lager brand doesn't end up as the next Stella Artois — mocked and relegated
to the bargain bin of your local off-licence.
For years Stella, owned by InBev, convinced boozers that it was “reassuringly expensive”. Then everyone worked out that it's just strong lager and dubbed it wife-beater, a nickname it will never shake off.
You can get six cans of it for £5 at every corner shop in town — it used to have class, now it's cooking lager.
For Peroni to avoid this fate it needs to keep its pricing within the realms of reality and £4.20 is seriously pushing it. It is, as Arsene Wenger said of the failed £100 million bid by Manchester City for Kaka, an inflationary trend in a deflationary world. In an age of austerity, premium goods will only survive if their status has some connection to the actual qualities of the product. Clever branding alone won't do it.
A consumer trading down should be able to notice the difference, to feel that he or she is missing something. I had a San Miguel for £3 instead and remembered that beer is simple stuff: barley, hops, yeast, water — it's hard to make a case for it as a luxury good.
Maybe £4.20 for a pint of lager at a pub in Stoke Newington made some sense at the height of the boom. Given that even the guy selling it now thinks this laughable, SAB may have a problem looming.
My bet is that Peroni will be on special at 99p a tin within two years.
