17 Sept 2013

Why this triumphalist Lloyds sale of 6% is a big fat nothing of spin bollocks.

Why is getting a 6% sale away at break-even for the Coalition, and a 75% loss to the Lloyds shareholder, a sign of imminent economic recovery, George?
osbornefingerThe Slog: The news these days consists of three steps where there used to be one. First, you wonder WhyTF they’ve done something. Second, they give you a reason. Third, the reason makes no sense and/or merely obfuscates the issue, so one starts looking for the real reason(s). The days when one heard news, read analysis and moved on ended around 1975, if my memory serves me correctly.
Most of the electorate, however, have stayed with a slightly simplified version of the original news imbibing modus operandum: they hear the news, feel puzzled, and then go back to sleep. From such citizen raw material was fashioned concepts such as the American Recovery, the Healing UK Economy, Falling Unemployment, Bail-ins at the Bank, Jimmy Savile raped a Nation, ClubMed austerity and Larry Summers for US Fed Reserve Chairman.
Today, the mystifying thing on my mind (not in or out, just sort of on it – like a cyst) is this ‘sale’ of Lloyds Bank to allegedly eager US investors.
You have to get down, on average, to para eight before anyone says or writes, ‘The move will cut the taxpayer’s stake in Lloyds from 38.7% to 32.7%.’ Or put another way, sell a small chair in the room while leaving the elephant happily eating the Yukka plant.
So here are my questions: 1. Why? 2. How much will it raise? 3. What will happen to the money?
Why? ‘The share sale will cut the UK’s  net debt by about £680m, and not impact borrowing’ says the Maily Sarkograph. WhyTF would selling a bank at 75p a share (or thereabouts) impact borrowing at all?
2. How much will it raise?  The Barclaygraph continues, ‘the sale will reduce the government’s net cash requirement by approximately £3.3bn’. Net cash requirement for what – bacon sandwiches at the Treasury?
‘Milestone equity offer hailed as further sign of country’s recovery,’ gushes the Financial Times. Hailed by whom? And at this point, we come full circle: why, George Osborne the Financial Onanist is hailing himself. He tells us that the US is betting on US recovery, and that shows we’re on the road to recovery. Why? Might it not show that US investors are f**kwits? Aren’t these the same investors who were still buying Greek bonds in 2011? The same ones who let Draghi subordinate them without a whimper? The same ones buying bonds backed by underclass rental payments?
3. What will happen to the money? Damned if I know, Henrietta. I like the sound of this hint from the FT, though: ‘One senior Lloyds executive said the sale had “given us our pride back”. “It’s a major milestone,” he said. “After getting the bank in profit and helping to support the UK economic recovery, getting taxpayers’ money back was a key target.” Great…so we the taxpayers are going to get a rebate, right? Er, no: the dosh will go to reducing the cost of Government debt servicing…something caused by Bank idiocy in the first place, and from which we will never get our money back, because it’s a black hole.
Some folks regain their pride with remarkably undeserved speed. And remember: a milestone is usually fashioned from a millstone.
So let’s use some historical perspective here. On March 19th 2007, the Lloyds share price reached a peak at £3.00.46. This entire 6% tranche we just sold overnight has just made a quarter of that. So over a six year period, the Lloyds shareholder has made a 75% loss.
The New Labour Government bought Lloyds shares when it part-nationalised the bank in 2008 for 73.6p. So the Draper’s new deal just broke even…for now. On roughly one-seventh of the 43.6% stake it was forced to take five years ago. Or rather, the stake it took with our money…which we will never get back.
That’s it. Breaking: squadron of crumpets spotted flying over Hastings sure sign of economic recovery says Lady Gaga.
Heigh-ho, 0nto the next item, then.

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