Small Cap Value Report (Wed 3 Oct 2018) - TPT, WIN, BOTB

Wednesday, Oct 03 2018 by

Good morning!

Did you see that TV programme about RBS last night? It was fascinating, and showed the extraordinary recklessness, hubris (and inadequate regulation) of the top brass at RBS leading up to the 2008 financial crisis.

This reminds me of an excellent book on the financial crisis, written by the then Chancellor of the Exchequer, Alistair Darling, called "Back from the Brink". This is a book I enjoyed, so it's well worth a read. I must dig out my copy & re-read it. Our banking system literally came within hours of collapse.

I see that Aston Martin Aston Martin Lagonda Global Holdings (LON:AML) has announced its offer price, which is £19.00 per share. With a total of 228.0m shares, this values it at £4.33bn. 57m shares are being sold by selling shareholders, about 25% of the shares in issue, with a further 5.7m shares possibly being sold. There doesn't appear to be any new money raised for the company.

I've added it to my price monitor, more for curiosity than anything else. There's a lot of volume being traded in the first 12 minutes of trading this morning, at the time of writing, 3.5m shares already traded, with the price moving slightly above & below the £19 issue price.

The development costs of new models are astronomical. So when I saw that AML was quoting EBITDA (which ignores those costs of course!), then I rejected it immediately as a possible investment. I like driving Aston Martins, but I wouldn't want to own shares in it.

It will be interesting to see how this deal works out. My broker tells me that the IPO and fundraising market is awful at the moment - with several proposed IPOs and placings being cancelled due to lack of interest from investors. Therefore this might not be a good time to be holding shares in listed stockbrokers, if they rely on deal income.

Topps Tiles (LON:TPT)

Share price: 66.4p (up 5.8% today at 08:06)
No. shares: 196.4m
Market cap: £130.4m

Trading update

Topps Tiles Plc (the "Group"), the UK's largest tile specialist, announces a trading update for the 52 week period ending 29 September 2018.

Following on from surprisingly good results from

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Topps Tiles Plc is a United Kingdom-based retailer of tiles. The Company is engaged in the retail distribution of ceramic and porcelain tiles, natural stone, and related products. It operates in the Topps Tiles stores and online business segment. It supplies tiles and associated products to both trade and retail customer base, primarily for the refurbishment of the United Kingdom domestic housing. Its product categories include new products, bathroom wall tiles, kitchen wall tiles, mosaic tiles, kitchen floor tiles, bathroom floor tiles, ceramic tiles, porcelain tiles, underfloor heating, wet rooms, outdoor tiles, fireplace tiles and metro tiles. Its brands include Tile Adhesive, Tile Grout, Tile Preparations, Hardiebacker Board, Rubi Tools and Accessories, Warmup, and Homelux Tiles Trims. It offers tiles in various colors, such as beige tiles, black tiles, blue tiles, brown tiles, cream tiles and gold tiles. It has over 350 stores across the United Kingdom. more »

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Wincanton plc is a provider of supply chain solutions. The Company operates through two segments: Retail & Consumer, and Industrial & Transport. Its Retail & Consumer segment focuses on consumer products business and brings to customers through the entire supply chain from producer to retailer, and Industrial & Transport segment focuses on an integrated and optimized transport operation, and includes Containers business and Pullman business. Its Pullman business provides transport and fleet services. The Company provides its services to a range of sectors, such as retail, which includes fashion logistics, e-commerce, food, health and beauty, leisure and lifestyle, consumer electronics and paper products, as well as manufacturing, which includes water, milk and bulk food, construction, consumer goods, energy and defense. The Company provides a range of services, including road transport, warehousing and value added services. Its value added services include packaging and consultancy. more »

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Best of the Best Plc runs car competitions. The Company displays luxury cars as competition prizes in rented retail space within airport terminals, at shopping centers and online. The Company is engaged in selling tickets to passing airport passengers, as well as from online customers through its Website. The Company operates from approximately eight United Kingdom and over two international airport sites, as well as approximately from three shopping centers. The Company operates from various airport sites located at Gatwick North, Gatwick South, Birmingham, Manchester Terminal 1, Edinburgh, Dublin's Terminal 2 and Westfield shopping center located in London's Shepherds Bush. The Company's Indian franchise trades under the BOTB brand from Hyderabad airport. The Company carries out its principal operations in the United Kingdom. The Company's subsidiary is Best of the Best ApS. more »

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39 Comments on this Article show/hide all

JTG 3rd Oct '18 20 of 39

Just a note to your comment on Wincanton's pension deficit, Paul. Last week we had the ONS figures indicate stagnating growth in UK life expectancy. Here's one actuary's take on it; .
It's far too early to make changes, but a second year of stagnation might help the outlook for companies like Wincanton. Thoughts, anyone?

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timarr 3rd Oct '18 21 of 39

In reply to post #404224

Correct. If this had been a normal liquidity crisis the Bank of England could have handled it in the normal fashion, but in 2008 liquidity issues were the symptom, not the disease. The underlying cause was counterparty risk: banks weren’t prepared to trade with each other because no one knew where the bodies were buried. That wasn’t a short term liquidity issue, it was a long term solvency problem.

As it turned out a lot of the corpses were piled up in RBS under Fred Goodwin’s desk and if they’d gone down then no one exactly knew what the ripple effects would be, only that it would have made the demise of Lehman Bros look like someone had raided a child’s piggy bank. Under the circumstances nationalisation was probably the only course open to the government. To argue that was a political action as opposed to a fiscal one you'd have to also argue that G.W.Bush’s mad libertarian Republicans also had a vested interest in nationalising U.S. banks. Which seems a tad unlikely, really.

What Labour got wrong, of course, was their management of the banks after nationalisation. Whereas the U.S. banks were allowed to trade their way out of their problems and eventually refloated at a profit, the risk management restrictions on RBS means that it’s still trading below the nationalisation price. But that’s a problem under multiple administrations, not exclusively a Labour party issue.

You can’t say that the last Labour government’s economic policy of spending as though the economic cycle had been abolished was particularly intelligent, or that their light-touch regulation regime worked out well. But under the circumstances that prevailed in 2008 nationalising RBS was about economic necessity, not political ideology.


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peterthegreat 3rd Oct '18 22 of 39

Interested to hear that you enjoy driving Aston Martins Paul, how many have you got? On a semi-serious note, I expect nearly everyone who contributes to this board will have received at least one email about the current Smithson Investment Trust IPO. This IT is attempting to emulate the remarkable success of Fundsmith Equity Fund, but with what Fundsmith calls smaller companies, although I'm not sure an average projected market cap of portfolio companies of £7 billion of pounds is everyone's idea of a smaller company. The methodical investing method used by Smith has worked spectacularly for large companies but has been disappointing for emerging market companies for reasons which I will not discuss here. I suggested to Terry Smith that he start a small cap fund a couple of years ago but his assistant declined (I still have the email!). I have shown that Smith's fundamental investing principals also work extremely well with much smaller companies so how about Paul and Graham get together and get the necessary clearance to lauch a real small companies fund (market cap from £100M to £5 billion) using ROCE, free cashflow and some of the other types of principles used (but not monopolised) by Fundsmith. I'd certainly be an investor and I reckon that the reflected glory from the Smithson Investment Trust, which I expect to be at least as successful as the Equity Fund, would prove an attraction for many investors.

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Roger Lawson 3rd Oct '18 23 of 39

In reply to post #404244

There were other ways it could have been handled, as it was in other countries such as the USA. The Immediate problem was that the RBS bank was out of cash - that tells me it was a liquidity crisis not a question of balance sheet solvency - the latter only appeared as a result of actions by the Government, the Bank of England, et al (or lack of action).

Website: Roliscon
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cig 3rd Oct '18 24 of 39

In reply to post #404279

Are you saying when someone doesn’t pay their bills it is never a hint they might be broke?

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dmjram 3rd Oct '18 25 of 39

In reply to post #404279

And why was RBS out of cash?
Because no one would lend to it because it had solvency issues. Just like AIG in the US - toxic assets all over its balance sheet which needed a state backed bail out. As in the UK.

Compare and contrast RBS with Barclays which luckily for them "lost" the ABN auction and didn't overpay for toxic rubbish. They were able to raise funds from the private sector.

RBS acquiring duff assets at stupid prices was not the result government activity.

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runthejoules 4th Oct '18 26 of 39

Oh Paul you forgot the holding article, tut tut! :-)

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mojomogoz 4th Oct '18 27 of 39

In reply to post #404244

On RBS and 2008 generally...

It was a small credit issue magnified by a mega liquidity issue. RBS had hubristic management and made some bad choices so were more exposed more quickly than others.

Of course. there is a reflexivity between the credit quality and liquidity but I think Roger Lawson is correct in the view that it was liquidity crisis...this is what was ultimately realised in the US and massive liquidity and some Fed back stopping was the solution. Hell central turned out to be AIG as they were massively short volatility due to the huge unbackable writing of credit default insurance. This credit default insurance was traded between bank balance sheets as a form of liquidity to permit them to leverage their own capital to the max.

Ground central for the crisis was the eurodollar market. Pre 2008 central banks would not really acknowledge its existence. The eurodollar is a massive sort of uncontrolled virtual currency. It is accounted for in US dollars but they are not real dollars. It is a massive (dwarfing any other currency) liability swap between banks.

Today we are hearing that the world is massively short of dollars again and that is why EMs are getting smashed up. This is a partial truth. There is some tightening of real US dollars however it is the loosely connected eurodollar liquidity that is contracting and creating shortage. Eurodollar and US dollar liquidity does not need to head in same direction. 2002-2008 saw significant US dollar tightening and yet the liquidity of eurodollar markets and so economic activity went through the roof (the more exotic the more boom - EM, commods, "innovative" credit, etc). However, post 2008 regs and reforms have brought USD and eurodollar closer together. This is not intentional but the consequence of those in charge not understanding the problem

Anyway, if interested in the above view here is a comment piece (short and not technical) I wrote recently for an econ mag...

Best wishes

PS IMO the eurodollar liquidity issue was so systemic and huge and misunderstood that stewardship of banks was inevitable - AIG in particular (not a bank I know). Note, that actual credit losses from 2008 crisis were relatively small compared to prior credit crises.

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mojomogoz 4th Oct '18 28 of 39

PPS on the above...

That a profit was made out of the stewardship of AIG - hell central - is a huge clue that it was not a major credit crisis. This is not dependent on the price paid for AIG as if credit losses were massive then the price paid would need to be negative (ie AIG paying it!) due to the nature of writing credit protection contracts (a little money to cover a lot!).

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dmjram 4th Oct '18 29 of 39

In reply to post #404369

Holding £hundreds of billions of assets on your balance sheet which are of dubious value is really not a liquidity issue.

PPS that a profit was made out of AIG is no indicator of the nature of the underlying issue faced at the time. Anymore than the value of a repossessed house a few years down the line is relevant to whether an individual is insolvent when the lenders came knocking for their money.

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mojomogoz 4th Oct '18 30 of 39

In reply to post #404439

They are not assets in any tangible sense. They are IOUs between financial balance sheets that form the world's biggest and most traded currency (by huge margin) called the eurodollar.

If credit (ie bad assets) where the cause then why has the cure been credit? The credit/assets may be proven bad (well will at some point) but that point is the fall of western market capitalism as we know it and a systemic economic crisis we have not seen since the likes of the fall of Rome.

AIG is good singular proof of this. It was selling trillions of insurance for a couple of billion dollars on credit for global bank balance sheets (as part of the eurodollar money creation process). AIG ultimately paid out on all that it owed and the Fed still made money. The Fed did not directly finance any of the debt. The evidence to date is that there was a low level of bad credit between banks (compare to US savings and loan, great depression, Tequilla crisis - all had much greater %age of GDP credit impairment at a time when leverage levels in the economy were significantly less than 2008). Really you are saying you do not like currency by fiat. That is a valid perspective obviously and leads to the holding of gold and physical resources.

As an aside, the famous John Paulson after shorting the crisis in 2008 turned massively to gold as IMO he had seen the bottom and then saw right through it to oblivion (ie in fiat there is nothing holding up the system!). Many of the successful short seller of the time took a renewed shine to gold as they were in effect traumatised by their success. I know a few of them and IMO they saw the negative subprime effect coming so identified specific short opportunities but they did not see how it would go systemic.

I disagree with the idea of going back to asset backed currency on the basis that it would be death knell of liberal democratic market based economies. However, that does not mean that money supply should not be controlled which really means the global fiat of eurodollar rather than narrow domestic currencies.

The conundrum we face is that debt creates money and money/liquidity is essential for free market activity and growth. Perversely, that means that austerity is self harm and that UK govt should borrow and just least until a new world order appears.

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dmjram 4th Oct '18 31 of 39

In reply to post #404449

What on earth do you think the distinction between the nature of the asset held as tangible, financial etc has to do with anything in relation to solvency? The cause was toxic assets that the entities could not impair without destroying their balance sheet and meet their liabilities as they fell due.

If any entity holds large amounts of impaired assets which it hasn't the reserves to cover and cannot meet its liabilities as they fall due, it is insolvent.

Just as LTCM was 20 years ago - it too like AIG would have been profitable ultimately. It just couldn't meet its liabilities to get there! Hence it went bust.

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mojomogoz 4th Oct '18 32 of 39

"What on earth do you think the distinction between the nature of the asset held as tangible, financial etc has to do with anything in relation to solvency? "

There is a distinction however that is not the point I am seeking to make. My point is that the "intangible" are created out of thin air and really just layers and layers of IOUs. When the liquidity crisis (in your opinion credit) crisis started to strike there was a scramble to find deliverable real assets. Perhaps the simplest lens to see this through is that gold tends to fall when counterparty fail to delivers occur rather than be the immediate safe haven. Why this happens is complex but is a function of effective gold supply going up when people seek to realise their holding due to the way that central banks account for their gold holdings (I'm willing to provide research on this if interested).

If the assets where toxic in 2008, why are they not toxic today? The fact remains that the actual credit losses from 2008 were small (contained mainly in the relatively small subprime market). The toxicity you refer to is simply the drying up of liquidity (ie banks not trusting each other) in a fiat system (the global eurodollar market the de facto prime currency of the world that happens to be accounted for in dollars).

AIG could not meet liabilities in the moment as the liquidity crisis was driving up spreads everywhere. This problem was solved by giving AIG and the market more liquidity (remember USD swap lines etc).

So AIG "went bust" as it was caught in a liquidity spiral. In that regard it had written bad business as it had not factored in what happens when there is lack of liquidity. HOWEVER, the underlying book was not toxic and Fed exited with considerable profit. This is impossible if loads of credit was written off as writing options on what was perceived to be decent quality credit at the time of writing does not give you the asset base to cover to much credit impairment. The fact is that AIG paid out on everything.

A parallel is the LTCM crisis. LTCM sought to do something similar to what investment banks do with their balance sheets (pre 2008) by arbitraging small spreads in assets globally (eg on the run versus older issue treasuries). Investment Banks would occasionally get into trouble doing that too as spreads are at times "irrational" (usually as there is a liquidity problem somewhere and trust breaks down). However, IBs pre 2008 had the capacity to extend their balance sheets (unregulated - so effectively thro eurodollar money creation) and could keep hitting the spread until it corrected. LTCM has investors and fixed capital. Note, this fact is why most prop traders from IBs blow themselves up when they start hedge funds

We disagree. I have provided factual points in response.

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dmjram 4th Oct '18 33 of 39

In reply to post #404479

No it is not my opinion that it was a credit crisis that led to the collapse of the likes of RBS, that was the symptom not the cause. Please read what was said:
" The cause was toxic assets that the entities could not impair without destroying their balance sheet and meet their liabilities as they fell due."
If really is nothing to do with gold/fiat scrips/MMT etc. It is simply the fact that the likes of RBS had impaired balance sheets without the reserves to cover them. Hence no one would lend to them. Compare and contrast with Barclays operating in the same liquidity/credit conditions.

"If the assets where toxic in 2008, why are they not toxic today?"
For the simple reason that the likes of RBS do not hold enormous balance sheets with assets they cannot afford to impair, the nature of which they do not understand. See the banking reforms on capitalisation levels/reserves/stress testing/ringfencing etc. The degree of toxicity to an asset holder is related to its ability to absorb fluctuations in that assets value. If it can't, it has solvency issues, which brings us back to RBS.

Re AIG, you ignore the recapitalisation via the TARP program to prop up its balance sheet via the purchase of $68bn of preference shares. That is NOT liquidity operations, it is shoring up the impaired balance sheet. See above re RBS.

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mojomogoz 4th Oct '18 34 of 39

In reply to post #404509

Well, we could say the same things to each other and get nowhere it seems. I feel I could equally say to you 'please read what was said" however that would be irritable, patronising and assuming a superior position....right?...

Recap at AIG was necessary due to liquidity crisis, just as LTCM needed a 'recap' to stem its liquidity crisis. $68bn is a drop in the ocean for all the credit exposure AIG had. That govt/Feb made good on the whole process of working through AIG is proof that credit problem, hence "toxicity" of assets was of low order. It was small even compared to other credit related crises. But the crisis within markets was stupendously large despite the ultimate smallness of the credit right offs. Its all about the roll the eurodollar plays in global finance. 

Of course, new capital is required to restore confidence...that is always the way as financial markets only believe in unicorns and fairies when the times are good...and when the nightmares come they want someone to hold their hand. The proof in the pudding is whether capital stumped up was gobbled up by the toxic monster you mention.

Perhaps the problem is your use of toxicity in place of specifically credit or liquidity. What is "toxicity"? Its an emotional concept from how the crisis was reported. There is not a financial variable or quantity defined by toxic.

Barclays v RBS...well that is an interesting story as Barclays after the event have been investigated and fined for what they disclosed during the crisis. It is arguable that they didn't tell the truth and RBS (more fool them did). RBS had a funding problem. Long duration assets and short duration liability. Hence was minced in liquidity crisis.

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dmjram 4th Oct '18 35 of 39

In reply to post #404539

You twice told me that I said the problem was a credit one when I had not. I was correcting your persistent mis-statement of what I had said and asked you to take the time to read what I had actually written having twice claimed I stated something I didn't. That I would suggest is not unreasonable.

"Recap at AIG was necessary due to liquidity crisis."
Recapistalisation is necessary when the balance sheet is impaired due to the write down on assets. See RBS also. Preference shares most definitely aren't the remedy for short term liquidity issues! They are expensive, non tax deductible long term capital.

'What is toxicity? Per above:
" The degree of toxicity to an asset holder is related to its ability to absorb fluctuations in that assets value. If it can't, it has solvency issues, which brings us back to RBS."
RBS had far too large and weak a balance sheet to be able to absorb the losses on its impaired assets acquired at a vastly inflated price. Hence those assets were fatally toxic to it and led to its insolvency.

"Barclays v RBS...well that is an interesting story"
Indeed. Barclays was fined for disclosure issues of fees related to obtaining its funding. Nothing to do with its ability to obtain finance in the same credit environment faced by RBS.
RBS short duration liabilities and long duration impaired assets its weak balance sheet couldn't handle writing down = insolvency.

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mojomogoz 4th Oct '18 36 of 39

In reply to post #404554

Dear dmjram

Its all a matter of interpretation. Look perhaps we agree but choose a different hierarchy and importance of things in how we explain things. In some ways we are not a million miles apart despite the heat.

On something like toxicity and whether it exists beyond narrative...where are the real world write-offs that are in anyway proportionate to the scale of the crisis. As you know IMO the crisis was primarily one of confidence, so liquidity, ignited by the always ephemeral "confidence" and its waning. There was a catalyst which was some bad subprime credit and instruments linked to it...but reaction was out of proportion. Therefore it is necessary to explain the lack of proportionately which leads to liquidity and the workings of eurodollar. Repeating that AIG or RBS had assets injections does not counter this. Its just a myopic perspective on a systemic event.

I saw it your way in the past. However, I have never found it a satisfying explanation as by now the acute credit crisis should have arisen again. I'm sure you'll accept as fact my point re lack of actual credit losses in meaningful scale?! All this "toxicity" and yet no visible sustained impact on asset and credit profiles? (remember toxicity - which you explained somewhat tautologically and I assume you really mean quality of the underlying assets/credit but wont say directly as supports my point and undermines your logic)

But the media, ten-a-penny crisis books, opinion, politicians all trot out lines that seem to verify your view. Toxic is said like it means something and people who don't really understand nod and agree and bemoan the toxicity of bankers. Ergo by being non consensus I must be wrong...

Its good to learn. I agreed with your assessment until a couple of years ago. Before the crisis I was somewhat a student of previous crisis. I had seen the crisis coming, mainly as I was lucky enough to speak to people who were cleverer than I and explained it to me (ie Big Short related sorts and that circle). It was a credit problem and I positioned to profit...and did. I thought there would be massive intervention and not the end of the world so positioned to recover in early 2009. It wasn't the end of the world but the years after 2008 did not fit with what resolution of a massive credit crisis would valuations and credit and asset growth should have been harder as bad assets/credit should have swallowed a lot of good capital (inc that provided by central banks and govts) and real economic growth should have been easier/higher from the bottom due the clearing of so much dead wood (ie there was not this clearing). Things worked very differently. We have not been a recovery process from a massive credit crisis. We are in something different and hard to explain....

I find an explanation that our financialised economies, to achieve high levels of growth, are very reliant on continual high funding and hidden gross credit/asset creation by banks (which nets close to zero) through eurodollar market to be persuasive (if hard to understand).

Once caged (by liquidity provision and some backstopping) the crisis disappeared from markets and they roared like nothing had happened. Of course, it is a different issue economically, socially and politically. IMO this is as we have suppressed the actual engine of our growth....eurodollar liquidity...without replacing it effectively.

Now, we may have a credit crisis on the horizon...but it can't be 2008's crisis reborn as that is too old and stale. It will be a new crisis.

I believe I am looking at things as they are and not through bias or borrowed narrative. I may be very wrong. I can never be sure and it is always uncomfortable to be contrarian.

I enjoyed talking about this as its interesting and a topic that I still struggle to understand. But I'm going to drop out now as we are at a dead end that will just become antagonistic and boring for others. For anyone interesting in learning more then I recommend the "Eurodollar university" discussions linked below. I don't believe it all but I found it reassuring re the view I had developed and gave me a deeper understanding. It's over 7 episodes and 7 hours all together but the info is truly stupendously great. The opening blurb is general market chat. I recommend MacroVoices as a top quality weekly macro chat. I believe that the interpretation provided by Jeffrey Snider is and will be adopted by those that govern the economy over time as it is so persuasively illuminating....

A lot to listen to but very illuminating.

Over and out.

Best wishes

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dmjram 4th Oct '18 37 of 39

In reply to post #404614

Entities with stretched, weak balance sheets holding assets at an inflated purchase price of dubious quality is really not a matter of interpretation re RBS. Neither was the subsequent £12bn rights issue made in an attempt to prop up itself up when Goodwin and co grasped their position. Nor was the £15bn write off on in RBS books for ABN alone, added to which ABN itself wrote off £16bn on its assets in one year when RBS had got shut of it.
It is a statement of fact.
As is the impact of said asset write downs on the solvency of the company. I'd say the impact was pretty toxic for its balance sheet health, wouldn't you?

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mojomogoz 5th Oct '18 38 of 39

In reply to post #404664

Hey, we could have just exited the conversation gracefully but you got to be curmudgeonly. I gave you the chance to respond magnanimously whilst still maintaining that you are correct and I am wrong.

So...what to say?...I have given explanations on 2008 and consequence in general. I might not be right but it is coherent and based on high quality insider direct experience (an insider to a "toxic" balance sheet that took a bank down and then an onlooker, as a sort of "professional" short seller due to circumstance, to many more balance sheets and connected subprime instruments). I have researched subsequently as with hindsight even though I made money and was in the middle of it I came to believe I never really understood what happened properly. As I pointed out above the trajectory of recovery is not consistent with a credit crisis. The spasmodic until now on-off nature of economic activity with no one able to sustain a quality burst for a long time is a big clue that we are not resolving a credit crisis today. Reality trumps tabloid narrative.

RBS is a specific case - "toxic" was overpaying for ABN and holding a relatively small portfolio of subprime (but just a whiff and the once super liquid and open interbank funding market - all propped up on eurodollar magic money creation - would dry up) and both were well short of 100 billion never mind your hyperbolic 100s billions. Please specify where the 100s billions of bad credit on RBS's balance sheet is. Your tabloid term toxic is just a way of covering your lack of specific comprehension of complex issues. At no point have you specifically linked 'toxic' to what drove the 2008 crisis at large which is what I was mainly discussing with RBS as an entry point. In general, 2008 didn't have much to do with goodwill write-offs for bad acquisitions (but of course when the tide goes out....etc).

But hey, no worries and nothing to be so embarrassed and defensive about as nobody really understands the financial system and that's why we are in a bit of a just lighten up a cannot make reality conform to what you want to limit it to or all that you are willing to acknowledge of it.

The UK govt provided £500bn in crisis to UK banks. £50bn of that was acquiring equity, £200bn through BoE special liquidity scheme and £250bn guarantee for lending between British banks. Most of it was loan guarantees. To date the govt has realised £2bn loss on the stake it took in RBS. At 250p they have another c.£20bn loss coming. In a purely arithmetic sense the hubris of overpaying for ABN can account for all that. The loan guarantees came out whole. So where's the massive "toxicity"?...

...where is the massive bad credit you have been implicitly on about whilst throwing around the toxic term? If all you wanted to say was that they hubristically overpaid for ABN then you should have stuck to that. I agree. RBS was also a badly run bank. Is that part of toxic too?

Just to be do know that implicit in all that you have said above you believe western financialised capitalism to be toxic? Will you be manning the barricades with the new messiah JC?

Good luck

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dmjram 5th Oct '18 39 of 39

In reply to post #404864

Hello again,

I will explain for the 3rd time that...

"where is the massive bad credit you have been implicitly on about"

...I have made no claims explicit/implicit/tacit about the credit conditions taking down RBS which is the discussion you entered. Indeed, I have explicitly stated that Barclays was able to obtain funding in those very same conditions to highlight how the insolvency issues were specific to RBS and not down to the liquidity/credit environment. So why you persist in stating that I have and ask me to provide evidence of something I never claimed is something of a mystery. See above (yet again).

It was...wait for it...the combination of a weak balance sheet and overpriced duff assets which said balance sheet couldn't handle writing down that did for RBS.
aka insolvency. NOT liquidity which was Roger's claim which you agreed with.

Which I believe is where we started before you started going on about fiat scrips, banks creating money as debt, MMT, gold, pref shares being the funding solution to short term liquidity issues and your latest musings regarding my religious fervour for political leaders.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
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