Suitpossum: Fragments of Financial Subversion

Glencore in the DRC: Building a case for shareholder activism

2012-02-19T11:46:00.002Z

Over the last year I've become somewhat intrigued by Glencore and other physical commodity traders. Part of that interest comes from my work on commodity speculation, and the fact that much of the analysis around that issue has focused on investment banks and hedge funds rather than the companies that actually deal in physical commodities. Part comes from my fascination with figuring out how the global trade system works. Glencore has the added draw of being a notoriously opaque and secretive company, with a controversial and swashbuckling ex-captain who made a name for himself by doing deals that no-one else would do. Trying to figure out how their vast commodity operations work is a detective mystery if ever there was one.

In May 2011 they went public and listed on the London Stock Exchange. That means they sold ownership stakes to investors via the UK market. Technically speaking though, they only sold about 12% of the company, and technically speaking, they're not based in the UK. Rather, Glencore is based in the Canton of Zug in Switzerland, which is, to use the words of the Canton's publicity team, renowned for 'its business-friendly mentality'... which is to say... um... low taxes. For tasks other than tax accounting, Glencore has other cosy offices, like the one in London, on Berkeley Street, next door to the Sainsbury’s that I used to buy salads at back in 2010.

Stirring the copper kettle

Anyway, last week I published an article about Glencore in The Ecologist, after spending some time digging into some of their operations in the Democratic Republic of Congo. The editor put in a byline which kind of sums it up: "Moves by unknown shell companies to control lucrative natural resources may have cost Democratic Republic of Congo $1 billion in lost revenue, as UK-listed mining company Glencore under pressure to explain deals"

Sounds pretty interesting right? If you want more detail, take a look at the article, but basically it concerns two mines in Katanga Province - Mutanda and Kansuki - that Glencore co-owns and operates. Back in early 2011, their business partner in the deals - the Congolese state-owned mining company Gecamines - sold off its stakes to two shell companies listed in the British Virgin Islands, associated with a controversial diamond dealer called Dan Gertler, allegedly at a big discount. This is by no means a new story - it first emerged back in July 2011 - but it’s a story that’s been seriously underreported and one that remains unresolved. In September IMF expressed concern, and a UK MP called Eric Joyce continues to try raise awareness about these, and other deals in the DRC copper-belt (see map below).

CHECK OUT THIS AMAZING KATANGA COPPER MAP ON GOOGLE

I wanted to write about the Mutanda / Kansuki issue to help keep it in the public eye. I also noticed that most reports to date have focused on the DRC companies involved. I wanted to ask another question: How much does Glencore know about what went on?

So I did ask that, but when I phoned Glencore, it appeared they didn't think much of my query. I got to chat to Glencore's main media spokesman, a pleasant guy called Simon Buerk (who incidentally used to work as the spokesman for Shell, so I guess he’s pretty well practised with inquisitive journalists asking probing questions). Simon was actually very open and took substantial time to chat to me whilst driving on a Swiss highway. His message, as quoted in the Ecologist article, was simple: Glencore is aware of the accusations against Gecamines, but these deals involve parties external to Glencore and therefore it is irrellevant to ask their opinion on it.

It’s a line which I find difficult to accept fully. It’s true that Glencore is not legally responsible for the actions of its business associates, but can we not argue that they have a moral duty of care to their shareholders to make sure every deal they’re involved in has very robust overall governance? If nothing else, the highly non-transparent manner in which the deals took place should immediately raise concerns among the public, and shareholders, especially when it concerns the DRC, a country notorious for poor institutions. Can Glencore assure it's shareholders that they're associated with business partners that uphold robust governance standards?

Taking ownership

Then again, most of Glencore's shares are held by the company management, and a handful of institutional investors (which include Abu Dhabi based Aabar Investments, the sovereign wealth fund of Singapore, and BlackRock). Whilst the institutional investors could be encouraged to ask questions, it's difficult to get such organisations to do so. On the other hand, if I buy some Glencore shares, I become a part-owner of the company, with a theoretical right to raise my concerns with the management, who I would technically-speaking employ (see my earlier post about my experiences doing this with Centrica).

So, last Saturday I attended the FairPensions Shareholder Activism training day held at Amnesty UK's Shoreditch offices. It was attended by a whole range of people from civil society organisations, looking to use the power of owning shares to push forward progressive causes, whether it be countering tar sands in Canada, questioning arctic oil drilling, or combating tax avoidance. For my part, I took the opportunity to workshop some potential questions to ask Glencore management at their annual general meeting.

An interesting question to ask the executives would be something like this: "Recently UK MP Eric Joyce and the IMF raised serious concerns about the sale of stakes in mines you co-own in the DRC. Joyce, and others, claim that your initial partner in the mines secretly sold their stakes to shell companies associated with a person closely connected to the DRC president Joseph Kabila, and did so at hugely discounted prices. This raises the issue of what due dilligence processes you have in place when entering into joint ventures with partners in countries known for high levels of political risk. My questions to you are 1) Are you aware of these allegations related to your business associates, and 2) What procedures do you have in place to assure shareholders that the company will not be exposed to potential future damages arising from reputational risk and politically-imposed penalties and fines?"

I'd probably need to get the question more precise and I suspect the answer would be pretty generic, but that’s not the point. Glencore undoubtedly has a strong response, but the fact of the matter is that nobody has yet challenged them, and if there is one thing that I believe as a general principle, it’s that it’s always preferable to challenge power than to not challenge it.

Hey guys, can I call you StrataCore?

That's going to be all the more important now that Glencore has announced a probable merger with XStrata, which would create a commodity behemoth unlike any we've seen before (The press are calling them Glencore Xstrata, but I bet they'll call themselves StrataCore). Glencore specialises in commodity trading, and XStrata specialises in physical mining, and whatever the combined entity gets called, both companies think that there is great potential for 'synergies'. In particular, there will be increased potential for ‘geographical arbitrage’, which is a fancy way of saying the company will have superlative ability to source low price commodities whilst selling them in places where the prices are much higher. It plays into the hands of Glencore's core business model, which revolves around its ability to make money off global commodity market inefficiency (Indeed, the original way Glencore founder Marc Rich did this was by doing deals in places where commodity prices were depressed by political isolation or turmoil, a skill that requires aggression and significant exposure to gatekeepers who are politically exposed).

XSTRATA 'HEADQUARTERS' in ZUG - YEAH RIGHT

If nothing else, Glencore and XStrata will have synergies in the Canton of Zug, where both companies are 'based'. The combined entity will be able to share a mailbox, and a tab at the local pub.

A new campaign is born! Banking on something better with MoveYourMoney UK

2012-01-31T23:34:00.001Z

I spent Christmas day at the London Occupy camps. Or perhaps I should say, I wanted to spend Christmas day there, but got there and left again wondering why I'd gone. Maybe I was just melancholic at spending another solitary Christmas, but I couldn’t help feeling that it was all a bit lost. I sat on the stairs of St. Paul’s and looked at a tent calling for everyone to become a vegan. There’s something slightly futile about that message. There's also something highly prescriptive about it, allowing little space for those who might sympathise in principle with the broad critique of finance, but who don't feel included in the ragtag countercultural facade. The Occupy movement is showing real signs of losing steam, and part of it is simply down to the fact that, when push comes to shove, it doesn't really offer that much to the everyday person.

That’s why I’m so pleased MoveYourMoneyUK arrived on the scene today. The campaign asks people to withdraw their money from the huge 'big 5' UK banks (Barclays, HSBC, Lloyds, RBS & Santander), and to deposit some or all of it into co-operatives, mutuals, credit unions and ethical banks. Coming on the heels of the more abstract Occupy-related campaigns, MYM seems to offer a wider range of people the chance to do something highly concrete, and which can make them feel included in an exciting process of incremental positive change.

CHRIS CLARK lays the smackdown on his Santander Card

While Occupy has offered some people a chance to take part in working groups on alternative economics, those always end up being long on theory and short on practice, effective at making people stop and think for a moment, but not effective in holding them to any action. Indeed, most people are not pissed of with banks because of something imprecise like ‘neoliberalism’. People are pissed off because of specific issues like bonuses, tax avoidance, unethical investments and speculation, all of which are a step away from the ideological arguments about grand economic structure. A simple action like moving money is a practical step that is available to almost anyone to take part in, because even if people don't agree on all the epic ideological questions (like whether we should have a steady state economy etc.), the banking oligopoly has managed to do specific things that annoy the shit out of most people in some way or other.

I was involved in writing some contributions for the website (including a piece on commodity speculation). The overall narrative regarding the problems with banks has been designed to be as simple and intuitive as possible, and I've sketched it out in the diagram on the left. It goes roughly as follows: We deposit money into banks. Those banks claim that they’re committed to supporting small business and productive enterprise, yet most of their lending seems to go into socially useless activities and speculation. They’re notoriously lax in their ethical policies, investing in shite projects and dubious regimes. Through all of this they’re supported by government subsidy that enhances their profits, and they then take the piss with the huge bonuses, which only serves to distort behaviour and increase systemic risk. To top it all, there are the not-so-small issues of tax avoidance and mis-selling scandals.

The campaign lays this out and then lays out the alternative options for people: Put your money into mutuals and ethical banks that will steer clear of risky speculation, and that focus on supporting SMEs and prudent, socially useful lending. The campaign doesn't claim that alternative banks are perfect, but points out, that unlike the major incumbents, they at least make a lot more effort to be sustainable.

What I like most about this campaign is that it is not just a defensive reaction against the current banking system, but also a chance for people to proactively support and build the alternative. You might not have the time or inclination to be actively involved in policy discussions around financial reform, but you can help animate change by steering your money towards those challengers that are forging a new path against the stagnant and complacent banking status quo. It’s as much a creative vote of confidence in the ability to build something new as it is a protest against the old, and I’m fascinated to see how it might affect the alternative banking institutions.

Anyway, that's enough theorising. Please get involved and pledge to move some or all of your money in March 2012! I've already pledged, not that I have much money to move, and since doing that the high street suddenly looks full of exciting opportunities. Should I move to a big alternative like the Co-op Bank, or maybe a building society like Nationwide, or something much smaller like the London Mutual Credit Union? Watch this space for more on that, and in the mean time, check out the cool new MYM UK video...

Protectors of Treasure Island: Border Dragons of the Offshore Financial System

2011-12-20T17:10:00.000Z

Several hundred years back, the City of London was protected by a great stone wall, and access was controlled via several key gates. Aldersgate was in the north, Ludgate was to the west, Aldgate was in the east, and on the south end of London Bridge there was Bridge Gate. Later, others were added, like Bishopsgate, Moorgate, Cripplegate, and Newgate. Nowadays, the physical wall and gates have slipped out of popular memory. To many modern commuters into the City, the Moorgate is nothing but a station on the Northern Line of the London Underground.

Recently, a wing of the Occupy movement set up camp just up the road from Moorgate, in Finsbury Square. Another wing set up in an old building in Sun Street. Like the original St. Paul’s Camp, the new camps seem like incongruous outposts amidst the black sheet glass and metal frames of buildings housing financial giants. The protesters have managed to take temporary control of small areas of physical space, and yet, do they really have true access to the City?

It seems to me that the walls of the City are still there, only nowadays you can’t see them. They exist in codes and institutions, cultures and hidden political forces, architectural styles and subtle symbols whispering you don't belong here. Finding ways of passing these hidden gates is a great and worthwhile challenge. Before that can be done though, it's good to get a sense of the ancient boundaries of the City. That's why I've been recently visiting the border dragons.

The City border dragons are sentinels on plinths, totem-like creatures lurking at the ancient entrances to the City, originally to warn travelers and act as toll-booths. They’re sometimes called griffins, but they’re actually dragons, dog-like dragons with wings and a forked tongue. Maybe they’re like small versions of Cerberus, Hade’s three-headed hound of darkness that guards the underworld across the river Styx. Indeed, you do find three of them as you cross over the river Thames – two on the south side of London Bridge, and one in the middle of the road on the south side of Blackfriars Bridge.

So where are the others found? The largest border dragon is found at the Temple Bar on Fleet Street, perched by the Royal Courts of Justice like a nazgul from the Lord of the Rings. There are two smaller ones keeping watch in the street next to Chancery Lane tube station on High Holborn. See if you can find the others. There’s one lurking somewhere on Goswell Road in the north, and one next to the Broadgate complex. There's one around Moorgate, and another guarding the area before the Tower of London, somewhere on Byward street.

My favourite border dragons though, are on the Victoria Embankment by Temple Place. They’re slightly larger than most of the dragons, and strangely enough, they used to reside above the entrance to the London Coal Exchange which was demolished in 1963. Word on the street is that they took off and flew into the night, landing on Victoria Embankment two years later.

Some have suggested that the dragons are creatures from mystical treasure islands known as offshore tax havens. Indeed, the City is at the centre of a giant web of such havens, a beating financial heart drawing in money from the opaque offshore jurisdictions and pumping it back out to them again, keeping a global system of secrecy alive. The vast majority of hedge funds and SPVs for example, are incorporated in places like the Cayman Islands, even though they’re managed from offices within London and the US. It poses something of a headache for tax authorities, and also places something of a burden on the broader society which does not have access to the offshore realms. Indeed, it's an open question as to how much of the City of London is even in London, and how much is situated within excel spreadsheets on computers in Bermuda and the British Virgin Islands.

Certainly the City incorporates a lot more physical space than meets the eye. It’s like that scene in The Lion, the Witch, and the Wardrobe where the door to Narnia is found. Hidden doors abound in the City, and they lead to parallel universes on Caribbean Shores and Swiss Cantons.

So where does this leave access? I'm not sure. The border dragons mark the ostensible borders of the City, but the true borders are scattered and fragmented by a world of shell companies and registered addresses. And we haven't even got into the cultural and political boundaries yet. I guess we’ll have to work on this access issue a bit more in due course. I’ve had controversial views on it before, and they need to be refined.

In the mean time, take some photos of dragons. Put a funny hat on its head, or give it some bling accessories. Please do send the photos on me. I’ll be sure to put them up.

Suitpossum's Ecologist article No.2: Four strategies of subtle financial subversion

2011-12-12T18:39:00.001Z

COMING TO A CINEMA NEAR YOU

Last week I got published in The Ecologist. The article was called A four-step guide to bypassing high street banks. This is my second article for the magazine (my first was on food speculation), and this time the aim was to sketch out how people might engage in financial protest, not by waving placards, but by changing debit cards.

Many people agree in principle that major high-street banks have too much power, and that they frequently abuse that power. Nevertheless, many individuals don't necessarily have the time, or inclination, to protest about it directly in the manner of the Occupy protesters. There's been a lot of discussion about how to make financial protest more inclusive (including this piece by Kenth Gustaffson on a type of ‘virtual occupy movement’), but perhaps one of the most profound (and often overlooked) forms of protest is to distance yourself from mainstream finance by withdrawing deposits and avoiding using the services.

The article is pretty straightforward. It goes through four (UK-focused) strategies:

You can move your money to a more socially responsible bank like the Co-Operative Bank, or to building societies and credit unions
You can invest savings in socially responsible alternatives, including certain investment funds and specialist investments with environmental or social benefits
If you need a loan, you can bypass the mainstream loan system and engage in peer-to-peer (P2P) finance or crowdfunding
If you want to go bold, you can try detach from the mainstream currency system and use alternative currencies

THE ANSWER: BREAK MONOPOLY

Bypassing mainstream finance is not necessarily easy or convenient, and it's not a solution to the deeper structural problems of the financial sector. Change though, needs to come from many different angles. Regulatory and policy changes are needed, internal cultural changes are needed, and more competition is needed. Moving your money and getting involved in alternative finance is one way to boost competition, and one way to support sustainable finance innovation. It's an act of protest, but in encouraging financial diversity, it's also an act of creativity.

Please do check out the article. Any comments are most welcome, and I’d dig to hear any other suggestions for alternative strategies that I might have missed.

Heresy in the shadow of the City: Max Keiser sacrifices the sacred cows of finance

2011-11-25T11:01:00.001Z

London banks were on high alert last week as Max Keiser – the dark lord of financial hellraising – arrived in London to do what he does best: Sacrifice the sacred cows of finance orthodoxy. It’s fitting that he chose to do so in a pub down an alley in London Bridge – The south bank has long been a place of covert speakeasies where villains, pirates and heretics might slag off the king and preach rebellion among the drunken rabble. The event was a fundraiser in aid of Resonance FM, London's alternative arts radio station. Needless to say, it was awesome, and yes, I was drunken rabble.

DARK LORD RAP: MAX RAGES AGAINST THE MACHINE

Max Keiser is in intriguing guy. I don’t claim to know his background in any depth, but the quoted back story says he was 1) initially a stockbroker, 2) then an entrepreneur that started the Hollywood Stock Exchange, (a platform for buying and selling film rights, later sold to the huge brokerage Cantor Fitzgerald) and 3) an entertainer that carved out a media career in fiery financial commentary. For those who haven't seen Max in action, he's one of the most outspoken critics of banking practice. He cuts a compelling figure, using a background in the financial industry as a platform from which to advance ideas that are serious no-go areas in mainstream finance chat… stuff like questioning the entire basis of modern monetary systems and advocating that senior bankers should be burnt at the stake.

If this stuff was coming from the standard academic commentator, it would probably sound crap, but Max has made an artform out of passionate advocacy of deeply heretical points of view. Where some people would sound preachy and self-righteous, Max just sounds indignant, pissed off, and funny to boot. He has what many critical academics lack – an opportunistic flair and a talent for entertainment. It’s very seldom that someone can make stand-up comedy out of financial commentary, whilst simultaneously making you deeply question things. He’s both a joker with a mischievous flame and an underdog hyena who cares about injustice. He doesn't claim to be pure, and the fact that he’s been out and tried the system gives him clout.

Financial terrorists

MY MATE LLOYD

Max is certainly controversial. In fact, he's pure leveraged controversy. He likes to refer to senior bankers as 'financial terrorists'. He shoots political correctness in the head with disturbing stories of financial rape and epic incompetence. He told us about 'the suicide trader', a concept he's been dreaming up as the basis for a potential upcoming production: The story goes that there's this trader in the World Trade Centre, watching the planes coming and deciding to stay in his chair betting against aeroplane stocks instead of trying to escape. Methinks that could cause a stir...

Karma-banking

OUTLAWS: STACY HERBERT & MAX

I met a hedge fund manager a few months ago who knows and loves Max. This probably supports my point, made in a recent Guardian article, that some of the best hedge fund managers are those that do not give a flying f**k about what they’re supposed to think. Max himself has dabbled in some interesting hedge fund ideas. Back in the early 2000s he started Karmabanque. Although it’s suggested that Karmabanque was a hedge-fund in and of itself, Max has characterised it as a ‘broker of dissent’ – a middleman between hedge funds looking to bet against companies, and activists looking to target companies with campaigns. I haven't been able to drill down into the exact structure of Karmabanque and how effective it was, but it's a thought-provoking idea: Betting against companies with poor social and environmental records and then making them targets of activism to drive down their share prices. Some would call that idea 'market-manipulation'. Others would call it sweet justice, a scheme in the spirit of Robin Hood and other underdog rogues (see Greenpeace article). Theoretically speaking, money made in the process could be steered back into doing something positive, like investing in renewable energy, but in the end it seems Karmabanque was shelved. It now provides an interesting model to consider when designing any future activist hedge funds.

Calling the emperor's new clothes: Buy silver, crash JP Morgan

More recently Max has become known for his 'Buy silver, crash JP Morgan' campaign. Max believes that JP Morgan is deeply exposed to a huge naked short position in silver. If it is true, it means JP Morgan is seriously vulnerable to the price of silver going up too much. He reckons that if enough people try buy silver to force the price up, JP Morgan would be forced to try cover its short position (i.e. reverse it's bet against silver), leading to a runaway 'short-squeeze' (in which they scramble to buy silver to get out of their trading position and in so doing cause the price to skyrocket even more) causing JP Morgan to go bankrupt. Here is the dramatised version:

It’s an interesting theory, and not one that I know enough about to have any particular view on it. Max seems pretty sure of himself though, and the campaign goes on. In any case, he advocates the possession of precious metals as a much better alternative to fiat currencies, which he thinks are all going to shit.

Time will tell if Max is right or wrong, but regardless of what you think of his ideas, it’s great to a have an original voice of dissent challenging orthodoxy. I'm always a supporter of muckrakers that keep the system on its toes, and after an hour or so of standing there listening to him I was cheering like a maniac and thinking ‘ah shit Max, you’re cool, can I come talk to you?’ Then he was swamped with fans and I decided against doing that. Maybe I'll meet him one day and we can compare notes.

Financial Psychogeography: Suitpossum joins forces with CurioCity London

2011-11-23T23:11:00.001Z

It’s a pleasure to announce that I will be syndicating out blog-posts to the website of the great new London-focused magazine CurioCity. CurioCity was started by Matthew Lloyd and Henry Elliot in early 2010, originally as an informal handmade pamphlet to distribute to friends and family. Back then, a group of us wrote articles and put together the first issue in Henry’s lounge in Kennington. It’s come a long way since then, and the first professionally printed version is now being stocked in iconic London outlets such as Foyles and Rough Trade. The website has now been set up to provide a regular flow of high quality pieces centered on London, suggesting ideas for experiences that are fun, educational, and that encourage a deeper engagement with the city.

Urban adventures in financial landscapes

My main focus is going to be ‘Financial Psychogeography’. ‘Psychogeography’ is a word that means different things to different people, but I’m taking it to refer to:

the exploration of cityscapes with the deliberate intent to break down oppressive or hegemonic ideas embodied in, or implied by, the physical space
and in the process seeking to reinvent or replace those ideas with unorthodox visions and alternative viewpoints… or something like that

Psycho-geography is about trying to identify the subconscious mental programmes that get installed in us by our physical environment. It’s also about creativity. It’s about trying to hack those programmes and reconfiguring the codes of mental DNA that condition how you perceive something. A greater awareness of physical space allows one to take mental control of it, and to re-enchant the cityscape with new perceptions. So basically it's an excuse for me to wonder around financial landscapes and reflect on them, considering what they might teach me about the world, how they might affect the way I think, and then maybe how the dominant ideas they impart can be challenged. This might be an epic waste of time, but if nothing else, it should provide a couple of fun outings and opportunities to embarrass myself.

Thus far, I've got two pieces up:

A brief history of psycho-geography

WHERE IT ALL BEGAN

If you look up the Wikipedia article about psycho-geography, you get some background history which says that psycho-geography was something developed by the Lettrist International, who broke away from some other group (also called the Lettrists) in France. It was spearheaded by a guy called Guy Debord, coming out with classic quotes like ‘the most urgent exercise of liberty is the destruction of idols’. Guy later wrote ‘The Society of the Spectacle’, a classic piece of ‘fuck-you authorities’ literature. By all accounts he and his mates were something like the French equivalent of Jack Kerouac and Alan Ginsberg, promoting a type of avant garde Marxism-meets-art sensibility, getting involved in the May 1968 wildcat strikes, and inspiring a generation of Gaulloises adverts and films like The Dreamers. Certainly, psycho-geography does bring to mind intense French students sitting around in cafes chain-smoking and fiercely debating the nature of the world. At its worst, it’s a load of pretentious bullshit, but if it’s done right with a bit of tongue in cheek, it can be a lot of fun. If it’s done really right, it can be transformational. Later generations of psycho-geographers like Iain Sinclair and Will Self have done a lot to bring to life the hidden codes of landscapes, and hopefully I can do the same in CurioCity.

Here is some footage of the launch party. I’m playing guitar in that.

Fun things to do in London's Financial Heartlands: Fusing Canary Wharf with the Real Economy

2011-11-01T15:30:00.001Z

The financial sector is frequently contrasted to the ‘real economy’. The ‘real economy’ is seen to involve the production of goods and (non-financial) services, while the financial sector is seen to act as a facilitator of, and gatekeeper to, investment flows into those industries. Banks and funds are in the business of predicting which businesses to back, steering debt and equity based on future perceptions of the real economy. The financial sector runs ahead of, or parallel to, the real economy. In some conceptions, it isn't connected to the real economy at all.

The usefulness and accuracy of the traditional distinction can certainly be questioned, but if ever there was a place in the world where the distinction made visual sense at least, it would be London. London is one of the few cities where the financial sector can literally be seen from a distance, most notably in the stark concrete and glass of Canary Wharf. London is also home to many decaying remnants of the old manufacturing economy, with monuments such as the Battersea Power Station a testament to both abandonment by the financial sector, but also attempts to re-connect to financial flows through regeneration proposals.

Visual mediums often tell stories a lot more effectively than words and pundits do. That’s why I'm an enthusiastic supporter of financial visualisations and infographics. A walk along the South Bank of the Thames though, offers some interesting opportunities to experience the visual divide between the financial sector and real economy directly, especially as one approaches Canary Wharf. Arranging the views to tell a story, and then capturing those stories on camera is a worthwhile way to spend a Sunday afternoon.

The abandoned pub

Here’s a simple scene that I found quite poignant. The pub was abandoned and boarded up, with the towers of finance looming behind. I don’t know exactly what one would want to read into it, but to me it could highlight the stark divide between an old English working-class docklands culture, and a new international financial culture gradually pushing it out.

The construction yard

This was one of my favourities: A construction yard just past Greenwich on the Thames Path. If you find it on a Sunday you can climb over the broken fence and play in the rubble. Again, there are a number of stories to be told. The construction site could be seen as a product of the financial sector - only existing through the provision of capital - or as the real underlying activity that the financial sector relies on to survive. Perhaps this rubble is a future financial centre. I personally just liked the visual contrast.

The spontaneous garden

Here’s a fun one. If you pay attention along the way, you can find fresh wild tomatoes growing in the industrial zone approaching the O2 arena on the Thames Path. The interpretations are endless. The financial sector connection to the farming industry? Small scale organics vs. large scale synthetics? The ancient agricultural roots of society holding out like a renegade against the ultra-modern world of derivatives and virtual food speculation?

The barbed-wire fence

A visual arrangement need not be literal. This just looked really cool to me, but maybe it could be seen as a play on entry into the financial sector. Is the financial sector guarded by barbed wire and a giant river moat? Not if I have my way about it.

The reclaimed pier

This old pier has been transformed into a mini ecological sanctuary to be used by nesting river birds: We arrived here as the sun was setting, but I’d like to read into it a message of future sustainability in finance and the creative use of the old to make a new dawn. Damn, I got to get out my notebook now and write poetry...

Just do it

It’s going to take a lot more than arranging images to build financial sustainability, but it’s an interesting exercise in the mean time, and a potentially thought-provoking one. There are hundreds of opportunities for this. How about starting at Stave Hill in the Rotherhithe Eco-Park, a great place to juxtapose the green with the blue-grey of global finance. I’m sure there’s a photographer out there who can do this a bit better than my HTC mobile phone camera can. Anyone want to collaborate? Please do send photos of your docklands journeys, along with possible interpretations, and I can put them up.

The Thames Path area between Deptford and North Greenwich and is also a hotbed for graffiti artists. It would be great to use the site for the development of financial graffiti - a living exhibition reflecting on the huge skyscrapers across the river. I’d personally like to stencil a QR code on one of the walls (p.s. these codes require a smartphone barcode-scanner app to read). I kind of had this one in mind...

Suitpossum in the Guardian: On Financial Activism and the Occupy Movement

2011-10-20T23:05:00.000+01:00

Winter is approaching and it’s looking like one of discontent. St. Paul’s cathedral has become home to a couple hundred protesters freezing in colourful tents, railing against the global financial sector. It's the Occupy London movement.

On Tuesday night I attended the general assembly outside St. Paul's. It was mostly to go through certain housekeeping protocols, like why it’s a bad idea to piss in bottles and throw them into public bins. Other items on the agenda were issues of security and maintaining good relationships with the St Paul’s clergy. It’s calmed down a lot since the first Saturday, when the cops were doing their tacky psychological warfare techniques, whispering sweet nothings like “Sir, if you enter the protest, you may not be able to leave again.” There’s a few cops left now, but they’re mostly blending into the scenery.

I was impressed by the camp food system that has sprung up, driven by kind donations, some from local chains like Pret (which incidentally are making shedloads of cash from cold protesters buying coffee from them). We even managed to get some sushi to go with our homemade vegetable soup. I was slightly less impressed by the public talks that have been occurring, a lot of (what I perceive to be) clichéd stuff about neoliberalism and bankers, and in general nothing particularly interesting or new. Indeed, it still seems to be much the same crowd that does all the protests. I suggested during the general assembly discussion group that much more needs to be done to translate the message to a wider audience, lest it fizzle out into a cliquey back-patting exercise.

KETTLE-FRIED LOVE

These issues weigh on my mind a lot, and yesterday I got an article published in the Guardian entitled 'Has the Occupy movement considered subverting global finance from within'. It was pointing out that while occupying a physical space is a worthwhile exercise, I think it’s time activists started pushing the conceptual boundaries of protest. I want progressive movements to try gain some control of the creative potential of the financial sector.

Needless to say, when you put yourself out there in a public forum (such as the Guardian), you get all sorts of ideologues that try throw knives at you. It was fun defending my ideas, but the ad hominem attacks are pretty disturbing at first. One suggested I wasn’t worthy of being in the human race. A couple attacked my professional credentials. A few attacked my grasp of socialist theory, under the somewhat presumptuous assumption that having read the great Marxian works was a prerequisite to commenting on activist techniques.

Such is the nature of public commentary though, and, on the plus side, some great people have got hold of me to discuss the ideas further. It's really rewarding to hear opinions on how the concept of financial activism could be refined, so please do read the article and post any comments on the Guardian site, or here. I'll be sure to respond.

The Finance Innovation Lab: Escape to the Country

2011-10-08T12:37:00.000+01:00

A few weeks ago a group of wayward individuals met at Waterloo station. We hitched a ride on a train going north into the English wilderness. Bertrand was forward-thinking enough to have brought beers for the journey, a skill he learnt in his 10 years working for Deutsche Bank as a structured equity derivatives trader. Next to him was Ingo. Ingo does things that make my mind hurt, which involves channelling and managing innovation and systems design, in Sweden. Behind me was Neil. He works for the Young Foundation, helping to design things called Social Impact Bonds, ways of allowing private investors to get involved in financing early interventions that might reduce social malladies. He was chatting to David, who specialises in design, and in particular, new means of mapping and visualising the financial sector. Bertrand started talking about social CDOs, and that's when people on the train started to look at us funny. A girl sitting next to me asked me who we were. Um, how do you explain that? We kind of work in finance, but at the same time are trying to disrupt it, alter it, play with it. I gave her my card. "Come to the dark side", I said, "there are cool things going on". Enter the Finance Innovation Lab.

This is me, trying to talk on camera after three days of mind-disruption. We were talking financial reform and innovation, but most of all, the group of 21 of us were all together to discuss and map the potential future strategy and vision for the Finance Lab. The Lab was originally set up to bring people together under the common goal of finding out what a 'financial system that served people and planet looked like'. I'm a comparative newcomer to the group, but in the year or so that I've been hanging around I've seen the fantastic potential the Lab has to connect people, and to promote learning and collaboration. The next challenge though, is how to scale it up to the next level, to bring in new streams of funding, target more people, and incubate more projects. Jen Morgan, Charlotte Millar, Richard Spencer, Rachel Sinha, Tina Santiago, Maria Scordialos, Vanessa Reid and Hendrik Tiesinga set up the frameworks to help us to think about these questions, and then let it run. A particular discussion point concerned the extent to which the Lab should shift from its current role as a facilitating and connecting organisation, to an organisation with a more explicit focus on advocating specific policies. The process of shifting to a more political stance isn't likely to be easy, but that why Chris Hewett has come in to explore the possibilities for 'finance policy for a green economy', with support from the Gulbenkian Foundation, represented at the weekend by Louisa Hooper.

SPOT THE EX-GOLD TRADER

Note the beautiful setting, on the grounds of West Lexham, a fantastic enterprise on an old converted farm. Manager Edmund wants it to be a hub for community empowerment, permaculture, renewable energy and creative solutions for sustainability, so that suited us pretty well. In our crew was Niahm, a whirlwind helping to drive WWF's sustainable food initiative, Tasting the Future - concerned with issues around sustainable food systems. We had Bruce, one of the guys behind peer-to-peer lending site Zopa, and now launching Abundance, a means for retail investors to put their money directly into financing wind farms and solar energy. We had the guys interested in unorthodox monetary systems - including Ben, pushing the boundaries of the monetary reform debate, and Leander, working on nurturing the complementary currency ecosystem. I shared a room in an old piggery with Maxime, representing both France and the socially responsible investment community.

PURE INNOVATION

The Fellowship of the Ning

BERTRAND SHARES HIS FEELINGS

The Finance Innovation Lab is a great space for those looking to get involved in designing a sustainable financial system. The first point of contact for those who are interested in getting involved is the online network hosted by Ning, but the core team is working on setting up a new website with enhanced capabilities. The plans are grand. By 2013, I expect we should own a large part of Canary Wharf. Until then, we get our strength from diversity. It's certainly not just for financialismos. It's for anyone with an interest in sustainability, creative design, systemic thinking, chaos theory, food systems, climate change, social justice, and last but not least, all those who just like causing a little bit of havoc.

THE MAIN REASON TO JOIN THE LAB: HOT GIRLS

Information as beauty: The art of the financial sector

2011-08-31T22:28:00.002+01:00

Analysis of financial systems is still dominated by talking-heads and written punditry. The traditional financial website is all tables and graphs with numbers, cliched phrases and received wisdom, normally more confusing than enlightening. These approaches don’t come remotely close to conveying the emotional currents of the financial sector, the historical richness, the sociological complexity and the sheer chaotic surrealism. Art is frequently viewed as a financial asset, so why not treat finance as art? That’s what my new 'Financial Expressions' series will be about. It is aimed at exploring creative alternative ways of expressing financial information and ideas about the financial sector.

Raw Material: Back to basics with pure information

David McCandless was right to point out that information is beautiful. He's made a career out of finding pretty ways to present it, but sometimes even the most raw forms of information can have a gorgeous artistry. The beauty of raw financial information was first made apparent to me when I was introduced to the Bloomberg financial data terminal.

ISN'T IT BEAUTIFUL?

It looks like 1970s pop art, with an armour-plated keyboard with colour-coded keys and retro text set against a black backdrop, like the old DOS systems. Its design seems to be inspired by old films of communist Russia, but for all its low-fi chic, the Bloomberg Terminal is one of the single most important items in the functioning of a capitalist financial system. The reason for this is that it provides raw information, live streaming prices of financial instruments and commodities, databases of company information, complex calculators to work out values and crunch statistics, profiles of individuals, and a lot of other stuff. It functions in a manner which serves to remind you that finance is an ancient art: It does not allow you to easily use a mouse to point and click on different options - you actually have to type in codes and hit ‘enter’. WEI gives you world equity indices, BTMM gives global bond markets. GRAB allows you to take a screenshot and email yourself a snapshot from a window into the world.

To me, the unique beauty of Bloomberg screenshots comes from the fact that they do not attempt to weave a coherent narrative around the information they present. If it's confusing watching the numbers jump around, it’s because confusion is the reality, and understanding is the abnormality.

Attempts to contain the chaotic nature of financial reality with clear stories must necessarily be shallow, but sometimes we need simplified realities. The following seven areas might be fruitful channels for those looking for creative routes to exploring financial complexities.

1) Sketching the system: Financial schematics

Thanks Brook

Schematics are a great way to simplify complex systems. Take the Shadow-Banking system for example. That's the vast labyrinth of securitised madness set on the wild shores of tax havens and the grimy jungles of London and New York. Need a map to navigate it? You sure do, lest you get eaten by an algorithm. Fortunately, the New York Fed was kind enough last year to develop a massive schematic to map it (see pg. 3). The map is so huge that to read the writing, one has to zoom the PDF to 300%. Alternatively, you can be like Brook Masters of the FT and print it out on a 3ft by 4ft sheet of paper. Take a look at it. Feel more enlightened?

Zerohedge did some great remixes of the map. The first is a circuit-board complete with a 'bailout chip' - try run this baby on your computer and watch the CPU explode and screen catch fire. The second is a Buddist Mandala - that's the Fed chanting soothing monetary aums.

Much work needs to be done in mapping financial systems with schematics. Mazes that people might want to take on include:

Multinational company ownership structures
Financial instruments (for example, structured products)
Alternative money transfer systems, like Hawala
Internal structures and dynamics of a large bank (good luck)

2) Financial visualisations & infographics
Visualising information and packaging it with slick graphics is increasingly popular as a means to convey the basic essence of certain financial and economic issues. Infographics are especially useful for presenting statistics, which frequently mean nothing when served up blandly in tables. In a world exploding with stats, the infographics industry can only get bigger. Listed below are a few samples from some great sites.

VisualComplexity: US Trade Deficits and Surplus
Wallstats: Death and Taxes
Chart Porn: US Energy Production
Flowing Data: 27 visualisations to understand the financial crisis
US Debt Visualised in 100 dollar bills

Other sites worth checking out include Many Eyes, Visualising Data, Information Aesthetics, and Cool Infographics. I've been using Newsmap as a useful way to get a quick sense of the top trending news stories across countries and topics. Finviz heatmaps are a great way to visualise the size of stockmarkets and companies. I haven't yet had a chance to explore it, but GlobalSpirometry looks incredible.

3) Moving pictures

There's also a whole world of infographic visualisation videos out there now. It's a fantastic medium, but I can't help but notice that a lot of these videos have become slightly formulaic variations on each other, sometimes a bit too slick, with flickering advert-like graphics and soundbites drawing seemingly clear messages from complex information. The financial ones have a tendency to depict bankers as fat men with top hats, which is slightly archaic, and suggestive of the fact that the people that make these videos probably don't hang out with bankers. That's especially clear when the technical mistakes slip in. Take this video about Glencore, the global physical commodity trader. It's visually stunning, but come on guys, Glencore isn't an 'institutional investor', as is claimed. I wish they'd get somebody to fact-check it if they’re going to go to all that work to create it in the first place.

Going forward, I think it would be great to expand collaboration between financial professionals and visual artists. An awesome example of fruitful professional collaboration on the economics front are the Keynes vs. Hayek rap videos, created by filmaker John Papola and economist Russ Roberts of George Mason University (and host of the great podcast, EconTalk).

4) Financial Haikus

Less is frequently more, so I've been trying to start a Twitter trend called #MarketHaiku. I'd like people to attempt to sum up the madness of daily markets in three lines with 17 syllables. Here are some examples (Ok, so these need some work still, but man is it fun):

#MarketHaiku 1: Volatility, is a five syllable word, bringing destruction
#PretentiousMarketHaiku 1: Wisened sage once said, To fear both the bull and bear, Is to fear nothing
#CommodityHaiku 1: Avocado, how tasty you are to me, all green and mushy
#PretentiousCommodityHaiku 1: I trade oil futures, and thereby make the present, the far distant past

5) Financial Landscape Art & Guerilla Semiotics

Andy Goldsworthy makes beautiful landscape art in the countryside, but I think we could do it within London itself, in financial zones such as The City, Mayfair and Canary Wharf. Banksy has long shown us that workscapes are pristine environments waiting to be subverted, but financial workscapes remain underrepresented in the urban subversion scene. There's a whole world of culture-jamming waiting to be unlocked, epic fireworks shows and small disruptions on the back of toilet doors. Who's up for stensilling the Wall Street Crash on the windows of Barclays Capital?

TOILET SUBVERSION: "CRASH JP MORGAN BUY SILVER"

6) Financial Performance art

Back in 2009 I had the rare opportunity to participate in an intriguing piece of financial performance art, run by well-known avant-gardista Haley Newman. A group of us stood outside the Bank of England and recited a mantra about consumerism. She called it Capitalists Anonymous. It was fun, albeit pretty bizarre. Let's design some more of these performances, because in a world characterised by absurdity disguised as normality, what do we have to lose, except dignity, and what's that worth anyway... (yo, get me the market price of dignity)

7) Markets and Music

Perhaps the most exciting idea for me personally, is putting music to financial markets. A while back, the FT commissioned composer Julian Anderson to create a musical piece interpreting the financial crisis. The result, to my ears, was underwhelming (listen to some snippets here). It's not just about notes and melodies, it's about texture of sound. A piano is not the right instrument for the financial crisis. You need electric guitars with fuzz pedals, amplifiers with built-in reverb and a moog synthesiser. A volatile market might be a Jimi Hendrix solo, set against a Les Claypool bassline of long term fundamentals. That's a future project waiting to happen. Anyone want to collaborate?

In the mean time, I thought I’d experiment with financial DJ decks and mash some Youtube videos together. I've found a radical combination: What do you get when mix an audio recording of a crazed S&P 500 futures commentator during last year's flash crash with a laid back bassline of 10ft Ganja Plant? You get Blood Money. It's not perfect yet by any means (and Youtube Doubler is pretty crap at synching - make sure both videos have a chance to load before watching), but I'm going to invest in some proper video editing technology so I can do this properly. Watch this space for my upcoming Youtube channel.

All these mediums offer potential channels for great creative madness, and maybe, just maybe, unorthodox routes to deepening our understanding of finance. If anybody has any other ideas, feel free to contact me. I'm always up for collaborating if you buy the whiskey.

Over and out.

I spy with my little eye: Introducing Suitpossum’s map of Global Energy Geopolitics

2011-07-31T20:08:00.001+01:00

Recently Google Maps has been blowing my (admittedly somewhat unstable) mind. It all started when I thought it would be great to travel around China, looking at Special Economic Zones. In the absense of cash to get a ticket to China though, I used Google Street View to drive through the outskirts of Hong Kong and to look longingly across the bay at Shenzhen, an economic engine on overdrive.

Virtual driving with Google streetview requires no petrol, but the system does rely on giant Google data centres sucking up huge quantities of electricity, so it ain’t exactly carbon-free travel yet. That’s a goal for the future, and in the spirit of a great transformation from carbon-intensive economies to a carbon-free one, I thought it would be interesting to use Google’s software to map the harware of global energy. Thus, I'm happy to introduce Suitpossum’s Map of Global Energy Geopolitics.

View Suitpossum's Global Energy Geopolitics in a larger map

It's the beginning of an ongoing project to break the global fossil fuel nexus down into easy-to-digest chunks. It's being created in conjunction with another map (to be introduced later), tracing the emergent geography of renewable energy. Ideally, over the next ten years or so, the importance of the former map will diminsh vis-a-vis the latter

The map is still under development, but thus far, the points of interest are split into 4 categories:

1) Oil (and gas) fields

This includes the gigantic Ghawar and Shaybah Oil Fields in Saudi Arabia, and badass fields in other important oil-exporting nations, like the Samotlor Field in Russia and the Tengiz Field in Kazakhstan. I recommend checking out the enormous dying Burgan oil field in Kuwait, which can literally be seen from the sky (seriously, it looks like pools of oil are coming to the surface). That's the field that was set alight by Iraqi troops during the first Gulf War. Nowadays though, it appears to be the Rumaila oil field in Iraq that's on fire.

Another aim of the map will be to profile unconventional and controversial oil and gas operations, such as shale gas deposits, and the obnoxious tar sands excavations in Fort MacKay, Canada. These are the focus of much environmental concern, not to mention dubious economics.

2) Oil (and gas) Terminals

The map has some special points for those who are interested in the world of commodity futures trading. To the left is Cushing, Oklahoma, the theoretical delivery point for all those WTI oil futures contracts that the financial press always talks about. I say 'theoretical', because about 95% of oil futures trades are made by daytrading speculators who have never actually seen real oil, never mind actually taken delivery of it. Cushing has however, recently seen some interesting investigations into oil market manipulation by physical oil traders. Another point of interest on the map is Sullom Voe, stuck out on the wilds of the Shetland Islands. That's where the ICE Brent Crude futures get settled, and you can use Google Streetview to drive right up to the entrance.

Another fun one is Henry Hub, south of Erath Louisiana. This is where a load of natural gas pipelines in the US meet, and it's also where NYMEX natural gas futures get settled. A particularly interesting curiosity just north of Erath is Lake Peignure, made famous when oil prospectors in the lake accidently drilled through the ceiling of a salt mining operation below, causing the entire lake to drain in a swirling vortex of doom that made the river flow backwards from the Gulf of Mexico. More recently, the salt caverns of Lake Peignure have become somewhat controversial storage facilities for natural gas.

Do take a look at the other oil and gas terminals. There's a really interesting one in the murky delta at Bonny, Nigeria, and another in the far reaches of De-Kastri, Russia. There's the Sangachal Terminal in Baku, Azerbaijan, right in the heart of the oil and gas operations of the Caspian sea. Finally, there is the amazing R’as Tanura Oil terminal in Saudi Arabia. Take a look at the town - it hosts Najmah, one of the gated communities for foreign expats that work for the world's largest oil company - Saudi Aramco. See if you can spot the golf course. One might say that political opinions on all this are somewhat fractious: Check this pissed off dude.

3) Coal fields

This aspect of the map remains underdeveloped. Coal tends to be less of a geopolitical issue than oil, due to it’s wide geographic spread and large quantities, but it's certaintly the dirtiest fossil-fuel of them all. Over the next few weeks I will be identifying key coal zones, which shouldn't be too hard, considering that the coal strip mines are about as subtle as bomb zones.

4) LNG operations, and other curiosities: This is going to be a section to trace exotic curiosities like Gas-to-Liquids (GTL) plants, coal liquefaction facilities, and liquified natural gas facilities like the one at Ras Laffan in Qatar. Ras Laffan looks like a cross between Star Trek and Mordor, except set in a desert. Take a look at some of the photos available on the Panaramio tool on Google Maps.

5) Strategic transportation routes

Finally, the map will seek to point out various chokepoints in energy transportation systems, including areas of pipeline vulnerability, and shipping lanes like the Strait of Hormuz that keep US generals up at night, popping Valium.

This project remains a work in progress, so any suggestions are most welcome. Hope it can be useful.

House Rent Blues: On legal loansharks and crowdfunding

2011-06-29T22:50:00.001+01:00

So I haven’t managed to get a blog post out for a couple weeks. That’s partly because I’ve been having some cash-flow management problems, due to some crap planning on my part and some unfortunate payment delays. This is an ongoing issue in freelance life, to smile through gritted teeth when someone at an organisation tells you the admin guy went on holiday and forgot to process your invoice. In a situation when one’s reserves are marginal, small frictions in the system can wipe you out.

Needless to say, when my landlord sent me an sms a few weeks ago saying ‘You haven’t paid your rent, and you have six months of bills to pay too,’ I got a deep down chill. My landlord is a cool guy. He only has one name, and our contract is informal at best, built on trust and belief in human nature rather than legal structures. That’s why he gave me some leeway, and that’s also why I didn’t want to abuse that trust. So I called up my friend George, and asked him what I should do. He wrote a song for me with some suggestions about how to deal with the house rent blues:

It’s an ancient blues, the house-rent blues, and financial services for people suffering from cash-flow irregularities are probably as old as the moon. Short-term loans attached to long-term shackles have long been the speciality of a certain class of societal demon called the Loan-Shark. I’ve been seeing the Loan-Shark in my dreams, under a bridge, at the crossroads of Highway 61 and Highway 49, right there in Clarksdale where John-Lee Hooker wrote the song. In that dream the Loan Shark says “35% interest per month, secured on your soul” and hands me a contract to sign. “That’s pretty steep” I say, “Are you regulated by the SEC?” He’s taken aback. “Hell no brother, but you can count on me.” I look at the small print on the contract. It says: “You can check out any time you like, but you can never leave.” Yes it’s true, the Devil uses clichés from the Eagles.

The dark desert highway of the Loan Shark extends around the world. You find them in Brazil, you find them in them in South Africa. In Bangladesh you’ve got the ‘5-6’: The guy that loans you 5 taka in the morning, and gets 6 taka back from you at night. That’s 20% interest in one day, which is about 7200% interest annually, uncompounded. That what you call raping the time value of money.

Anyway, in dealing with my cash-flow problem I decided to stay away from Brixton’s loan sharks and to take a look at the legal pay-day loan services. Payday loans are like advances on a salary. You show them proof that you will be getting paid at some point. They advance you the money. You pay the money back with interest when you salary comes through. It’s a way to tide you over liquidity crises.

There’s a big new payday loan outlet that recently opened up by the Brixton Academy, opposite the St. Barnados Charity Shop. I had to wait for a while to get served, and watched a women in her early 30s sort of plead with them for a two-day extention on a £200 loan that she couldn’t quite pay back yet. I’m not sure there was a pleasant story behind her situation, and the lady who served her was gently refusing. It can’t be an easy job dealing with people on the thin-edge of financial stability.

LO-FI FINANCE

When my turn came, I got served by a young guy who was quick to tell me that the company is actually American, and that they have six outlets in the UK, the Brixton branch being a flagship of sorts. As for the terms of their payday loan: 25% per month, which is 300% per year, more modest than the classic loan shark, but ridiculous costly nevertheless. In order to get a £625 pound advance on your paycheck, you’d have to pay them back £780. I asked what would happen if I didn’t pay back in time. He said the matter is then passed on to their payment delinquency service, who would organise an ‘alternative payment plan’.

I reckoned I might check out some of the online payday loan services instead. Payday UK comes top of the search results. Again, the terms of the loan are 25% interest per month. Yep, for a £400 advance, you pay back £500 in a month. Wonga is another one, only this time it has a deceptively cuddly name and even worse terms: For £400 loan, you pay back £525 within a month. This really does not seem like a sustainable business model and people looking for £400 advances aren’t really the kind of people who should be spending £125 on liquidity management. There must be social enterprise models waiting to emerge in this space…

Out of curiosity I visited the pawn shop. Pawn shops allow you to pledge gold or jewelry as collateral in exchange for a loan. I didn’t actually have anything valuable to pawn, but if I did, their deal was better, at 6% interest per month.

WILL YOU ACCEPT MY AMULETS AS COLLATERAL?

The lower interest rate is a due to the fact the loan is secured on some valuable bounty, so if you don’t pay back, they just keep your stash. Collateral lowers your ‘cost of capital’ because it provides protection to the lender, and it’s one of those unfortunate realities that those who possess collateral tend to be wealthy individuals. Some might say that that’s a reason why wealth tends to concentrate around existing wealth… ahem, Mr. Marx.

So what do you do when you don’t have collateral to base a loan off? You label yourself an entrepreneur, and you raise money against the fabulous future wealth that you claim you'll create. That’s what I was thinking when I went to a talk on crowd-funding, given by Theresa Burton from a company called BuzzBnk. The idea behind crowd-funding is that you attract small-scale (philanthropic) investors to contribute to your cause. You need a catchy story to get people to invest in you though, and ‘Can you guys give me £400 so that I can pay my landlord’ is not going to cut it. On the other hand, ‘Can you give me £3000 so I can finish my book’ just might…. Did I mention that I’m writing a book? (more on this topic later)

In the end, time constraints required that I turn to the most powerful and ancient financial service: Angel investors…. By which I mean friends, the great providers of flexible and low interest loans. Thanks guys.

The moral of the story then is that I continue to live an unsustainable life and have a great new idea for an unprofitable business: A freelancers’ co-operative to help London’s army of freelance workers deal with the ordeals of invoice delays. This sounds like a good idea, to sink my energy into something which will have… um …. marginal and sporadic cash flows attached to it, at best.

But who needs stability when you have one bourbon, one scotch, and one beer…

As for how I defeated the Loan-Shark, I had another dream last night:

Suitpossum does Food Speculation: Farmers, Hedge Funds and the Ecologist

2011-06-13T22:16:00.000+01:00

On Thursday I made my first appearance in the Ecologist, by all accounts one of the world’s leading environmental publications, founded in the 1970s. Yeah, airpunch!

The subject of the article was food speculation. It sounds obscure, but concerns around speculation on agricultural futures have been seeping into the mainstream agenda over the last few months in the context of rising global food prices. There is rising suspicion that the activities of financial players in commodity futures markets could have a distorting effect on futures prices, and thus that food price increases might be linked to computer algorithms running in some hedge fund in Mayfair.

WHEATBIX FUTURES

Having had experience in the world of derivatives, I’m always prepared to accommodate the idea that irrational behaviour in financial markets could distort prices. That said, I’ve remained cautious about populist arguments about why speculation must necessarily be a negative force. Thus, in late 2010, I attended a talk on agricultural speculation organised by the World Development Movement (WDM), who were one of the first to make a scene about this issue. I asked some difficult questions to the speakers and got thinking about the argument. Several months down the line, I ended up working with WDM on a report, and found myself joining a chorus of veritable shitstirrers raising awareness about the potential dangers of this issue.

The debate started a few years ago in the context of the 2008 commodity price spike. In the US, advocacy group BetterMarkets have been a leading critical voice advocating heightened regulation and position limits in agricultural futures markets. The US think-tank, IATP, has also been outspoken, recently releasing a compendium of useful articles they’ve published on the subject of excessive speculation. In the UK, WDM have been a trailblazer on the radical front for the last couple years, but more mainstream UK institutions have recently been catching onto this as well. Last month, Christian Aid added a bit of righteous anger in their report Hungry for Justice, and Oxfam is getting uneasy about it too. Then last week the UN global trade body, UNCTAD, added their stamp of disapproval towards ‘financialisation’ and poor transparency in commodity markets, with a hard-hitting technical report on the matter.

The UNCTAD report should hopefully add some more fire into the debate, which since 2010 has been somewhat stifled by an academically controversial, but politically safe report commission by the OECD. The OECD report’s authors, Scott Irwin and Dwight Sanders, claim to have found no connection between the increased participation of financial players in commodity markets and the crazy 2008 commodity spike. I’m all for healthy skepticism, but there’s something vaguely reminiscent of climate change denialism in the way that conservative pundits have latched onto this work as if it’s the final be-all-and-end-all of the matter. In real academic life, nothing can be settled with a single study, and the extensive critiques of this piece have been strangely ignored by the mainstream economic fraternity.

Certainly, this issue has the potential for highly polarised opinions. In January, Murray from WDM went head to head with Scott Irwin on CNBC, and to my mind, lays the smackdown on him. I mean, I’m sure Scott is a cool guy to hang out with at the pub, but he makes almost no attempt to engage here.

A similar level of disinterest is found in Terry Duffy, the chairman of the CME group, in his debate against the UN's Olivier De Schutter on BBC’s HardTalk in March. Terry says there’s no problem. Olivier says there is. Terry behaves like a condescending dick. Olivier doesn’t. Who should I believe?

For my part, I took part in a wheat price debate on the Farmers Guardian website last week. I suggested that farmers concerned about wheat price volatility should lobby financial institutions to spend less time investing in food prices, and more time investing in agricultural innovation and productivity. Failing that, I suggested farmers should band together, form a hedge fund, and use their superior knowledge of agricultural realities to outclass the precocious pseudo-farmers sitting in Barclays Capital. I got some enthusiastic responses to that.

I’d love to see that happen. What I don’t want to see happen is for this issue to go unscrutinised, only to lead to seriously serious fallout five years down the line. We've got to get the precautionary principle into action, so please do take a read of my Ecologist article, join the debate, and feel free to leave comments.

Environmental Finance: A Roadmap beyond the Dirty Dark Spread

2011-06-05T22:30:00.000+01:00

Do you know what a dirty dark spread is? To work it out you take the price of wholesale electricity, and you subtract from that the price of coal multiplied by an efficiency factor. What you’re left with is an indication of the profitability of a coal-fired power station. And we call that the dirty dark spread.

HOW DO YOU LIKE YOUR DARK SPREADS?

But why ‘dirty’? We call it dirty because there’s a clean version of the dark spread, called the Clean Dark Spread. It's basically the same as the dirty one, except it adds the price of carbon dioxide to the equation. What you’re left with is an indication of the profitability of a coal-fired power station within a system that explicitly puts a price on carbon. It's lower, but the key question is 'how much lower?'

The only reason we can make these distinctions is due to the existence of the carbon markets, brought into the fold through the Kyoto Protocol and the European Emissions Trading Scheme, perhaps the world’s most controversial market. 2010 though, saw the carbon markets tank amidst uncertainty over the future of global climate agreements, and last week’s Carbon Expo, held in Barcelona, undoubtedly saw carbon market participants doing some soul-searching. For quite some time, environmental finance has been associated with carbon markets, but the search for more holistic systems is leading to a shift away from pure carbon finance, to a broader focus on climate finance.

So tomorrow, the UNFCCC convenes in Bonn to talk climate in the run-up to December's COP 17 in Durban. The key question for passage-way conversations: How are we going to finance not only climate change mitigation efforts, which has been the focus of the carbon markets to date, but also climate change adaption? Another hotly controversial area is forestry finance. Two weeks ago, the Indonesian government finally signed a two year deal with Norway, in which Norway pays them $1 billion to limit licenses for forest logging. It’s the first major bilateral public climate finance deal, and a big step forward for the so-called REDD programme – Reducing Emissions from Deforestation and Forest Degradation. Nobody really knows how it’s supposed to work yet, but REDD is seen as a key pillar in any future climate finance systems.

The last few weeks have also seen some interesting progress in the UK, with the government launching the Green Investment Bank. The GIB will be in the business of project financing renewable energy and energy efficiency programmes, under the broader prerogative of moving Britain to a low carbon economy. Last week also saw the UK government releasing the National Ecosystem Assessment, an attempt at valuing the ecosystems of the British Isles. I have a vague feeling that, despite being at the cutting edge of economic research, trying to price an abstract concept like 'nature' will one day be looked upon in kind of the same way as we look upon eugenics, astrology, or other past pseudosciences. In the mean time though, it will, for better or worse, become part of the broader debate on ‘payment for ecosystems services’.

Outside of the arcane discussions about whether you can use financial options-pricing theory to value biodiversity, the real entrepreneurs are concerned with more practical matters. In the last month, I’ve been lucky enough to meet two guys separately working in the area of green bonds, credit instruments through which investors can lend money to environmental projects. These things are on the verge of going mainstream, with the IFC recently issuing green bonds to raise money for renewable energy. And that brings me to Luke, who I met whilst sitting in the Café at Foyles book store. Luke used to design algorithms for financial trading systems. Now he’s got a moleskine notebook with sketches for a new type of solar thermal tower which would use the sun’s energy to heat water to drive electricity-generation turbines. No mainstream bank is going to finance it – He needs renewable energy venture capital, an exciting and growing area of environmental finance aimed at the technology innovation market. “What I need,” he says, “is an old guy with too much money, and not enough time to spend it.” Maybe what he needs a government subsidy – like the feed-in tariffs – but the regulatory environment is getting pretty uncertain.

The most amazing thing about this all though, is that literally nobody has a clue on how it will all work out. We’re creating it right here, right now, ocean blueprints and forest greenprints. Will Luke’s solar project revolutionise the world? Will someone get venture funding to figure out how to harvest electricity from lightning? Will the green bond concept turn out to be a non-starting buzzword magnet? Will the carbon market exist in 10 years time? What innovation will emerge that we cannot yet conceptualise? Will Suitpossum be successful in designing a trans-generational environmental risk management system with almost no budget and a failing Wifi connection?

For more on all these topics, tune into the Suitpossum EnviroFinance series, starting tonight, and unfolding over the next several weeks on a computer screen near you.

Fun Outings to Crap Headquarters 1: Tesco

2011-05-29T20:43:00.000+01:00

An hour or so out of London, in the commuter belt, is a place called Cheshunt. It is home to the world’s crappest corporate headquarters. They belong to Tesco and they're situated in a light industrial zone, next door to Monster Gym, the first American style warehouse gym in the UK (satellite image here and google street view here)

TESCO: A RIGHT SHITHOLE

This photo was taken in 2009, and at the time I was trying to sell Tesco esoteric financial derivatives. I sat in a room with someone from the treasury and suggested she should consider entering into a large transaction which, at the time, I thought to be in both our interests. She didn’t dig the idea, but appreciated the attempt. Innovation, she said, was what Tesco was all about.

Looking back, I feel privileged to have walked the crap linoleum floor of the world’s crappest corporate headquarters, to have seen the crap canteen plonked in the entrance lobby, and the crap cramped desks of the employees that run one of the world’s largest retailers. If nothing else, I was impressed to see a company truly living its values.

I had a reason to be there, but why would you want to go there? I think it’s worth a visit because Tesco is a key node in the global trade in consumer goods, and it’s startling that such an enormous task gets done in such a mundane setting.

Retailers, much like banks, act as intermediaries, but where banks act as intermediaries in investment goods, retailers act as intermediaries for consumption goods. As such, they are key gatekeepers between the world’s producers and us. Globalisation of consumer items, as it were, gets mediated through them.

LET ME INSPECT YOUR GOODS

In particular, globalisation gets sorted out in this warehouse, across the road from the headquarters. It’s where producers bring goods that they want Tesco to stock, to see if they make the cut. My mate Charlie has been in there, once upon a time when he was trying to start a business reliant on the consumer market. He tells of the horrors of that experience, watching a team of four inspectors move along the aisles, looking at proposed products. One is a product specialist. One is a floor layout specialist. One is a lawyer. One is a health and safety professional. Charlie has an entertaining tale, but it ends in tears and personal bankruptcy, which is one reason he ended up alongside me, trying to sell derivatives to pay off his debt.

Tesco may not have bankrupted you, but everyone has their connection to it, from fruit farmers in South Africa to London junkies. So go see Tesco and pay your respects to the most utterly shite, yet perhaps most authentic, corporate headquarters in the world. Take a photo, and if you see Elma, tell her Suitpossum says hi.

How to get involved in disruptive finance: The Finance Innovation Lab

2011-05-22T19:50:00.000+01:00

Trading floors and paneled offices in Canary Wharf look profoundly hi-tech, and yet they are built on blueprints inherited from the past, in some cases the very distant past. Modern financial institutions like to use the language of innovation, and yet they endorse only a narrow conception of innovation, focused on product innovation. There’s very little tinkering with the base level assumptions from which they are created.

To challenge the deep-level normative status quo requires one to move out of the mainstream salons, and into the fringe coffee shops and covert speakeasies. Close to Moorgate station is one such safehouse, down a small alley, behind an austere wooden door. Enter the Finance Innovation Lab.

The Finance Lab initially started as a joint project by the WWF and ICAEW, asking the question “What does a financial system that serves people and planet look like?” It’s now a forum for an assortment of financial heretics, some outrightly so, others more subtly so. The community is partially centered on an online platform hosted by the Ning social networking architecture, and partly on monthly meetings where ideas are presented and workshopped.

On Friday, I attended the monthly brainstorm. The setting is old English, in a meeting room with gilded portraits, but the content was anything but traditional. The session focused on work by David Braid, showcasing his graphic design visualisations of the financial sector as a tool for altering the way people perceive the sector. Ben Curtis was also there to discuss the PositiveMoney campaign that seeks radical monetary reform. The atmosphere is part collaborative, for people to throw around wacky ideas, and part critical reflection, to bring attention to shortcomings in proposed innovations. Friday’s session saw both impulses in action. For my part, I wanted to see David’s financial maps interpreted by graffiti artists on the walls of the urban downtown, and I wanted to see a more robust proposal by the PositiveMoney guys.

In the end, the sessions are not designed to be prescriptive. Presentations are used to set up loose themes as a backdrop for open-ended explorations. Key topics that have developed over the months include complementary currencies, social finance innovations, methods for dealing with complexity in finance, building resilience and dealing with risk, grassroots finance and mutual credit systems, social enterprise and community investment, behaviourial economics, environmental economics and the art of dealing with externalities, crowd financing, religion and philosophical aspects of finance, alternative conceptions of value, alternative metrics of economic wellbeing, and alternative goals for economic systems.

In part, the specifics of what is discussed doesn’t necessarily matter. More important is the fact that you’re able to do it, and to meet others who are doing it. Ideas have a way of fertilising other ideas and creating mutations. It’s the Silicon Valley effect. You hang out with people like Bertrand, Eli, Tav, Nick, Mary, Timothy, Max, Deeti, Giles, Rachel, Jen and loads of others who are doing similar things, and your own ideas get sharpened and informed in light of theirs.

There’s also no single objective. Some have a particular agendas. Some frame their goals in utopian or moral terms, whilst others are more hard-edged or pragmatic. There's a general sense of trying to make the financial system better. For me though, the objective is disruption, change for change’s sake. I think the true value of these forums is to workshop ideas that can cause shit, for better or for worse, and see if the resultant disruptions, outcomes not strictly known, could potentially lead somewhere worthwhile. I like the idea of a creative dialectic to keep the system on its toes.

Over the next few months I’ll profile some of the movements I've encountered at the Finance Lab in this blog, some of the fascinating thinkers and some of the shit-stirrers. Keep tuned, and sign up.

The Politics and Culture of Social Finance: Big Society Bank

2011-05-15T23:55:00.001+01:00

London is the home to a small but growing ‘social finance’ community. It’s an imprecise term, but in general social finance is seen to encompass finance for social causes, finance for public services, finance for social enterprises, and finance for vulnerable communities. That covers a pretty wide scope, ranging from crackpot schemes to move back to a barter economy, all the way to mainstream debates about alternative finance sources for public services.

On Wednesday I attended PopSe!, a ‘popup think-tank’ on social enterprise. The theme of the day was social finance, and in particular, the issues around the UK government’s plans to set up the ‘Big Society Bank’.

That’s a pretty politicised name for a bank, and gives rise to interpretations of it being the thin edge of a wedge the government is promoting to take the slack from its public service pull-back. To be accurate though, the Big Society Bank is not really a bank. It’s more like an investment fund, and it will start with £100 million, to be used for the purpose of providing wholesale finance to other social finance organisations. In other words, it’s supposed to be a financier for social financiers.

In the grand scheme of things, a hundred million pounds is pretty tiny, but a handful of mainstream banks have pledged to put cash in as well. All this raises fears of it becoming a window-dressing operation for banks’ CSR departments, as well as the government. The murky political undertones, and it’s potential to be used as a means to change in the culture of social services, means there’s a fair amount of skepticism about this new ‘social investment bank’.

At Wednesday’s discussion session, participants expressed concern at the lack of specific detail on what the bank’s remit was. It’s supposed to support social financiers, but will that include credit unions and community development finance institutions – CDFIs? Would it really support existing social finance institutions, or would it actually compete with them, as some fear. We wondered who would get employed there – would it be staffed by jaded ex-public sector employees, or ex-investment bankers carrying sad tales of emptiness in the fast-lane, in search of something meaningful?

All these details will be ironed out in due course. What I’m more worried about is the culture of social finance: The problem is that it’s still so bloody un-sexy, bogged down in public sector buzzword speak, phrases like ‘enhanced service delivery’ and ‘outcomes-based commissioning’. There’s little in the way of hard technology and cowboy venture capitalists. Instead, there’s abstract concepts and social metrics designed by people with concerned looks on their faces. It’s self-conscious, and that makes me suspicious to its potential for overhyping itself.

My last question at the meeting remained unanswered: What relevance does the Big Society Bank have to large-scale housing, health and education needs in the country? A one hundred million fund ain’t even going to come close to touching those issues. Social finance needs to be upscaled beyond being an add-on to the small-scale social enterprise sector. It needs to move beyond Bono sunglasses and Apple Macs. It needs serious realism.

On the trail of the Living Wage: Suitpossum does Centrica

2011-05-11T11:16:00.000+01:00

Last week Boris Johnson announced the Living Wage to be £8.30 for London. The Living Wage campaign, started by Citizens UK, recently celebrated its tenth year of trying to boost the incomes of those on the lowest rungs of enterprise. One way to speed up the campaign is through shareholder activism, buying a share and attending the annual general meeting of a company to raise the issue.

On Monday, I attended the Centrica AGM on behalf of advocacy group FairPensions, to see if the board would be willing to commit to the Living Wage. Centrica are the guys that run British Gas, and they have a large number of employees in lower salary brackets, for example, all the call-centre staff.

You’re playing to a tough crowd when you do shareholder activism. Think about who actually attends a three hour meeting starting at mid-day: Most are loyal supporters of the company and many are former employees, now retired. They have a slightly sycophantic edge, especially considering part of their self-identity is wrapped up in their years of service to the company. It’s easy for the chairman to turn them against anyone raining on the parade.

THE GUYS WHO RUN BRITISH GAS

So my strategy was as follows: 1) Wear a smart suit, 2) drop in Boris Johnson’s name to deflect suspicions of left-wing status, 3) suggest the Living Wage is becoming recognised as an important mark of commitment to Corporate Social Responsibility, and that, as such, it’s an important business decision, and 4) that as a shareholder, I believe it to be an issue which needs to be carefully assessed by the board.

Those should prevent you from being seen as a raving radical quack, and forces a serious response from the board. Unfortunately, it doesn’t guarantee you anything of substance: In his response to my question, Chairman Sir Roger Carr gave a true politician’s answer, asserting that the company paid more than the minimum* wage, whilst avoiding direct mention of commitment to the Living Wage.

There was a tea afterwards, in which the directors mingled with the shareholders. I used it to chat to three of the directors, including the head of the American business. Treat them with respect and they’re forced to do the same back. He assured me the Living Wage issue would be brought up at their next CSR meeting.

Shareholder activism is but one method of getting yourself heard, and it has its limitations, but it can be a surprisingly effective way to get up close and personal with senior management of the world’s largest companies.

*(the minimum wage is considerably lower than the LivingWage)

Financing climate innovation: WRI and the bounty system

2011-05-04T11:48:00.000+01:00

Last week the World Resources Institute (WRI) posted a challenge on Innocentive, the online innovation reward website, offering cash prizes to individuals for solutions to climate change adaption issues. There is a total of $10 000 up for grabs if you can articulate a clear and actionable vision for climate change communication strategies in vulnerable communities.

WRI’s approach adds to the broader debate on how you finance climate innovation. There’s much discussion concerning how to deploy money into existing technologies and ideas, but how do you best put money into creating new technologies and ideas?

In issues of strategic concern, governments have frequently used grants, for example, to support universities and research institutes to develop new ideas and technologies. That has the advantage of giving innovators space to develop ideas without an immediate need for commercialisation. On the other hand, government grants risk being too prescriptive: What if the government chooses the wrong initiatives to support, and sinks money into non-starting technologies and concepts?

An alternative strategy has been to encourage private sector involvement in research and development through establishing intellectual property rights regimes and legal patents. These do protect innovators that sink time and resources into R&D from the prospect of others freeriding on the products of that labour. On the other hand, they only do so at the cost of creating artificial monopolies, which can have very detrimental side-effects when it comes to crucial issues of welfare, for example, in pharmaceuticals.

Perhaps the most underused method for promoting innovation though, has been the bounty system – offering prizes to induce people to solve something. Back in the 1700s, the bounty system was used to induce the creation of the first accurate maritime clock that revolutionised ocean navigation. Prizes needn’t be purely monetary though: Academic prizes like the Nobel Prizes have done much to inspire much cutting edge research, providing innovators with goals to work towards.

CREATED BY BOUNTY

Innocentive is an interesting example of the bounty system. Private companies and institutions post challenges, and offer to pay individuals who can solve the challenges. A lot of the challenges to date have been scientific – how to synthesise a chemical component, or how to make fizzy drinks that don’t go flat. It’s a quick and efficient way to hone in on people who are carrying necessary skills and to harness those skills without having to directly hire them. They can be anywhere in the world, but many come from developing countries, providing a potential source of income for bright PhD students.

The obvious shortcoming of any bounty system is that if a problem seems too complex, individuals might not feel it worthwhile to put in time and effort. Many people simply do not have the luxury to commit large energy to something without any guarantee of being paid, so the bounty system probably works best for relatively less complex puzzles.

The World Resources Institute puzzle seems complex enough, but seeks ideas rather than finished technologies. They want bright ideas for “communication platforms that will connect information about local community needs to public and private sector organizations that can provide solutions and support”, so as to improve community resilience in the face of changes brought on by global warming.

At the time of writing, there were about 200 people working on the challenge, with a deadline in June. That theoretically gives you a roughly 0.5% chance of winning, assuming all were equal in their abilities. If you think you have what it takes to turn the odds in your favour, why not join up? Even if you don’t win, it gives you a chance to develop and professionalise your ideas. And, yeah, I get to take a small commission from anybody who wins after reading this blog post.

Suitpossum does Twitter

2011-04-28T09:10:00.000+01:00

I've just signed up for a Twitter account: http://twitter.com/#!/Suitpossum

I'll mostly use it to write haikus. I'll also flag up interesting pieces related to social & environmental finance innovation, financial activism, alternative financial systems, and international development.

MY FIRST TWITTER FOLLOWER

Please do follow @Suitpossum if you're into the Twitter lifestyle.

Financial Zones of London: How to get good coffee in Berkeley Square, Mayfair

2011-04-27T21:29:00.000+01:00

There’s a troubling question in my mind whenever I’m in Berkeley Square: It’s the mystery of why I can’t find any good coffee here. It’s mysterious precisely because this square is the centre of the world’s largest concentration of hedge funds, and that kind of means the average person walking here commands a salary larger than…well, everyone else in the whole world. So where’s the good coffee?

BERKELEY SQUARE, MAYFAIR

Have you ever wondered what a hedge fund is? I mean, I can tell you that a hedge fund is a company registered in the Cayman Islands, and that people around the world put money into it, and then it uses that money as collateral to borrow a bunch more money, and uses that to bet on various things like company shares, commodities, bonds, and derivatives…

But does that really tell you what a hedge fund is? To know what a hedge fund is, you should try run your hand over the golden plaques on the doors around Berkeley Square. The names seem unfamiliar, but this is a ring of fire, and these companies are sorcerers channeling enormous circuits of cash. The old facades hide computer networks sending orders to transact in every market on the globe. In fact, I’d give you 2:1 odds that there’s someone in that inconspicuous building over there that’s about to execute a trade that will affect the value of Russian mining companies in Siberia.

But where’s my good coffee? I know where it is. Lansdowne House, 57 Berkeley Square, houses one of the world’s largest private equity companies – The Carlyle Group on floor 3. Those guys must have good coffee. Have you ever wondered what a private equity company is? I mean, I can tell you that a private equity company runs private equity funds, registered in the Cayman Islands, and that people around the world put money into those funds, and then those funds use that money as collateral to borrow a bunch more money, and use that to buy and sell companies.

But would that really tell you what a private equity company is? To know what a private equity company is, put on a heavy Russian accent, walk in and tell the Carlyle Group that you’ve got an ailing Siberian mining business that needs restructuring – they’ll take you to their meeting room and give you good coffee.


LANSDOWNE HOUSE, COFFEE SHOP FLOOR 3

Then you can head back to Green Park tube via Berkeley Street. You’ll pass Glencore. It’s Swiss, and it’s one of the world’s largest privately owned companies. The UK office is by the Sainsbury’s on the corner. They’re huge in the global commodity scene, and they’re only about to get bigger, with a gargantuan IPO* planned. They’ve historically not been too transparent, and, word on the street is that commodities can be a dirty business at times, with all that Siberian mining. This area looks posh, but it’s not – it’s all cowboys, assassins, and oligarchs.

*(refers to initial public offering: selling shares of ownership to raise money)

Fun things to do in London’s Financial heartland No.1: Going on Exchange

2011-04-21T18:29:00.000+01:00

Last week I took a London-based NGO to the London Metal Exchange. We’re kind of concerned about some issues around commodity speculation, so thought it would be worth a visit. To be fair, I sometimes go with my friend Harry just for fun, because it’s such a darn unique curiosity. If you ever want to do it, go to the LME website, fill in the booking form and send it to them.

Why would you want to go there? Because it’s the largest global exchange in industrial metals, and that makes it an interesting node in the matrix of global trade. It mostly deals with metal derivatives (futures and options contracts for future delivery of metal), but trade in physical metals for immediate delivery also occurs. I spoke to a trader outside when he was having a smoke, and he said that if you deal in the physical ‘spot’ contracts, you’ll have metal waiting for you in a warehouse within two days.

The real choice is what metal you want. There’s no useless precious metal here, it’s all useful base metals, the physical underpinnings of global industrialisation and urbanisation. Most important is copper, used in electronics and construction. Its price is a key proxy for world economic growth, especially of developing countries. Chilean mines are the largest suppliers, and Chinese companies are the largest consumers. We churn through some 50 000 tonnes of this stuff each day.

Second up is aluminum, used for cars and construction and tin foil. Then there’s zinc, mostly used for galvanising steel for the auto and construction industries. Nickel gets used in the creation of stainless steel, and batteries for hybrid cars. Normal car batteries get made out of lead, half of which is mined in China. Rechargeable batteries for mobile phones get made with cobalt, mostly produced in the Democratic Republic of the Congo, but then shipped to China. Other metals include tin, dominated by only four producing countries – China, Indonesia, Peru and Malaysia – and molybdenum, a rare earth used in steel alloys.

Every metal on the exchange is pretty much dominated by China in terms of global consumption, and, frequently, production. It thus seems something of a historical anachronism that the exchange is in London rather than Shanghai. Then again, it’s an open question about how much of the LME trade is actually related to physical metals for real-world use, and how much is purely related to the speculative activities of London-based investors.

So let’s say a hedge fund decides that things in the DRC aren’t looking favourable. They phone their local broker at the office, and request to purchase 100 cobalt futures. The broker at the office phones his floor broker on the exchange, who gives the order to the clerk. The clerk gives the order to a guy sitting on a plush red leather couch in the ring. This is the ring dealer. The ring dealer casually shouts that they want to buy 100 cobalt futures. Some other ring dealer, carrying a different order, casually agrees to sell. Deal done. The clerk relays the info back, and the phone rings at the hedge fund office, telling them that the trade is done. They now own 100 tonnes of cobalt, in a roundabout way, through the derivative.

And this kind of thing goes on all day, and the prices set in the process become the ‘official’ price of cobalt around the world, used as a benchmark for producers and users to set their own prices.

For the most excitement, you probably want to go for the ‘kerb trading’ sessions, the afternoon free-for-all where they shout at each other. The earlier sessions are kind of boring and the ring dealers just sit around and don’t seem that interested in setting the global price of metal. Keep a look out while you’re there for moments of intrigue: See if you can spot JP Morgan trying to corner the copper market.

Goodbye Really Free School

2011-04-19T08:09:00.000+01:00

It’s with sadness that I discover the Really Free School has shut down. It was one of the most original responses to education cuts, a band of misfits occupying buildings to host voluntary lecture programmes, taking a grand piano with them wherever they went.

Back in February I joined forces with Corporate Watch, in presenting a primer on the financial crisis at the school. It took place in an old mansion in Bloomsbury Square, in an upper-floor room with a projector. I had a double-sided A5 page of notes. On the one side was written ‘Credit; Ownership; Currency; Commodities; Derivatives’. On the other side was written “Commercial banks, investment banks, interdealer brokers; Institutional investors, hedge funds, private equity”. I started by holding it up and saying, “On this side is all the stuff the financial sector deals with, and on this other side, is all the people that deal with it.”

That’s not entirely accurate, but I’m a believer in establishing simple frameworks around complicated topics. It at least allows listeners to feel in control, rather than the panic brought on when someone raps about abstract evils and twisted theories. In the audience was a zonked-out cat called Andy – he’d worked for a hedge fund, and subsequently progressed into a life of squatting and community work. People think that’s strange, but I don’t think so at all: The hedge-fund hounds are often individuals on the borderline, interesting people with crazy ideas. We got chatting afterwards about financial activism, a fascinating topic I'll develop on in later blog posts.

I went back to the school several times. I took notes at a workshop on internet security. I watched a film about a feminist revolution. I saw a lady called Barb Jacobson give a talk about alternative monetary systems. I arrived for a session on setting up a ‘Timebank’, but nobody pitched up to give it. I attended an amazing poetry session, got drunk and recited my favourite haiku: “Oh avocado, how tasty you are to me, all green and mushy.”

There was some stuff of questionable quality. Like part 3 of that film Zeitgeist, utterly shite. And then there was the talk by a guy who’d written a paper on tax havens. He spoke endlessly about critical theory, rather than tax havens, and used words like ‘aporia’ and ‘bios’. At some point I lost it and had to leave.

But, when push comes to shove, that was the real beauty of the Really Free School. If you wanted to contribute, you really were free to do so, and if you wanted to leave, you could. The real question is whether it ever had the internal impetus to keep going. Perhaps it needed a more directed education programme, a process of strategically commissioning talks rather than relying on organic volunteering. The idea of a travelling school materialising in old buildings is catchy, but you need substance to complete it.

G-20 Demonstrations: Two Years On

2011-04-16T19:24:00.000+01:00

On Thursday the Guardian reported on a High Court ruling, holding that the Metropolitan Police were unlawful in ‘kettling’ protesters during the G-20 demonstrations in April 2009.

Two years ago, I took this photo. It was some three hours after the police line came like a running of the riot bulls down Bishopsgate, randomly trampling flower-children in a startling display of the arbitrary powers of the state. The bulldozing was sanctioned for some official reason not quite understood by anyone present, especially considering they’d chosen to target the hippies rather than the anarchists, but apparently it was necessary, for some reason, unknown to anyone present. Note the Financial Times in the foreground. There was an article in it by Martin Wolf entitled ‘The urgency of now: Why tomorrow’s G-20 summit will fail to deal with the big challenges.” It made for interesting reading while the police deployed their state-of-the-art kettling strategy.

This guy in the photo was employed as a wall of silence, but I chatted to him, and he made thoughtful comments like “I am not authorised to answer questions on the situation.” I took a piss under a big metal door, kind of an attempt to have my say in the face of this deprivation of voice. A high-spirited dude with overalls came over with his hand in the air. “Hey man,” he shouted, “high five, you came disguised as a banker!” We slapped hands, and I said, “Actually I’m a derivatives broker”. He froze on the spot. “Oh right, I’ve got a friend who’s an accountant.” I had to laugh at the suggestion that there was some similarity between an accountant and a broker. “Really, accountants are not nearly as bad as derivatives brokers man. Accountants can only really distort numbers, whereas we can distort entire markets.” He stood there uncomfortably, but I suppose it’s not usual to have this kind of conversation at a rally united by an apparent stand against the excesses of financial capitalism.

I guess the whole kettling strategy was a massive success. By inciting anger that didn’t originally exist, the police forces justified their presence in a self-fulfilling feedback loop. It was a loop that got unstable though, and one that jeopardised their ability to extricate themselves from the situation. They were on the verge of losing the psychological edge and spontaneous forms of coherent rebellion were starting to emerge. Nothing brings out the ‘fuck you’ in people like arbitrary power, and sooner or later, people get together and override it. At that point, bringing in the snapping dogs only makes people angrier.

So, after six hours, they let us out. Some of the cops looked as if they were about to cry. I walked past one of the guys and said, “Thanks man, you did a good job tonight.” He almost choked. “Thank you, that’s the nicest thing anyone has said to me all day.”

He did do a good job, but it was a job in the service of an utterly pointless attempt to stifle a necessary part of the workings of a democratic society. Good to see that the high court has recognised that.

Introduction

2011-04-07T22:29:00.000+01:00

In 2008 I embarked on an unusual experiment in gonzo urban anthropology. I left the world of radical left-wing academia, and went to London with two goals in mind. Goal one: To break into the financial sector at the heart of one of the most powerful centres of the global economy and to see first-hand how it worked, to learn by doing, not by reading. Goal two: To shatter the complacent intellectual comfort zone I’d found myself in, and to learn to move in and out of different worlds like a chameleon. It was an exercise in critical thought, backed by real action.

That’s how I found myself on the 36th floor of the Lehman Brothers offices in Canary Wharf, four weeks before the company collapsed, and how I found myself in the subsequent financial crisis, trying to pitch esoteric inflation derivatives, property derivatives, and longevity derivatives, aboard a mad raft with an oddball crew of old rogues and young rats, fighting against the odds to stay afloat. It’s a pretty interesting story, and I hope to tell it some time.

In the mean time, I’m completely broke, in a room in Brixton, with a pile of business cards and a stack of ideas, most of which don’t add up. Sometimes I help unusual people to get to grips with conceptually challenging things, like what the financial system might be. I look at how financial concepts might be channeled creatively, through the fledgling world of social and environmental finance, and consider why all this might matter in issues of social and environmental justice.

Sometimes I look at bizarre curiosities, like new currencies and new units of time, Islamic finance, Hawala systems and financial crime. I delve into the way the financial sector tries to reconcile our views of the future in the present.

Sometimes I hang out with people who call themselves anarchists, but who are mostly just concerned about a world they perceive as offering them nothing but bland complacency and treadmill materialism. They hack conventions and set up bases in old abandoned buildings, but are still daunted by the seemingly intractable, impenetrable and arcane financial structures around them. I urge them to try engage more, to spend less time throwing rocks at things, and more time subverting their own preconceptions. They look at me weirdly, but I think there’s a lot to be said for a new activist philosophy.

I play a lot of guitar. I once busked on the New York Underground. I have a pricing model on my hardrive that can tell you what rate to charge for a bet on how long people live for. I lifted it from an investment bank, and one day, when I learn to use it, I'm going to create a rock 'n roll symphony.

I once went to a fancy university, got an MPhil in Development Studies, wrote some papers. Sometimes I hang out with development people, talk trade policy, agricultural subsidies, NGOs. Other times I hang out with finance dudes, talk about things like sugar and carbon.