Skip to main content

Changing Financial World Order

When I became a banker, in 1984, the financial world was well organized.  In the City of London there were clear rules as to who did what, fixed commission the easy life; then Tatcher's government decided to tip over the apple cart and implemented the Big Bang of financial reforms.  Big American brokers set up shop in the City covering the globe with their knowhow.  

In no time the old City was swept away -- the Americans with their speed and capital took over and impose their rules -- granted the American learned their share of new stuff, foreign currency were a no mans land, I was privileged to "assist" as a very very junior banker, as the first European interest rate swap was written (we didn't think we were doing something that would change the world).  It was just a contract.  The Americans could be amazingly obtruse; one back office guys in New York, decided that Sterling could not be worth more than the US dollar -- and for months booked F/X trades upside down...

Now the gasumper is being gasumped!

Last summer the Economist published a survey that showed that crowdfunding is now providing as much capital as the venture capital business.  Fintech as they are known are killing the banks, making full use of the internet they are often more nimble and have fewer of the legacy problems that large financial institutions have to take into consideration. Crowdsourcing is the first proof that things are changing.  Obviously, there will be fraud -- if money is involved they will find a way.  But already the early seeds are paying off;


  • Want to send money abroad?  
  • What to have a receivable tracker (attached to your accounting system) and a financing option?


There are Fintech for that.  For years accounting software has been available on line. but imagine allowing all your invoices (received electronically) to be auto scanned and filed and processed without human touch -- great when you have a few a day, amazing when its a few hundred. The processes are scalable, and they are killing the established players -- thank God! Over the past 25 years the financial industry has become the biggest rip-off there is, in 1984 financing activity accounted for less than 2% of GDP, today its nearly 8%.  Little value added -- considering all the fraud we have encountered (market rigging) etc.

My guess is that when the next financial crisis occurs (no I have no idea!!!) a lot of these fintech will have a wide open field as the banks retrench "non-core" activities.  Because that' how they work. They look at divisional performance take no account of changing market views and then cut!  

On a final note winter has finally arrived in Canada.  Whereas Christmas eve was a balmy 15c this morning the temperature in Montreal was -16c.  The snow has also showed up, with nearly 70cm in the past week.





Comments

Post a Comment

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process
Post a Comment
Read more

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki
Post a Comment
Read more

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu
Post a Comment
Read more