Saturday, July 14, 2012

Bedlam Asset Management: "The default delusion: Inevitable....and desirable"

I've mentioned Bedlam a few times* and had meant to check in with them more often.
I forgot.
From Bedlam Asset Management:
Pick of the Week June 1, 2012
 The many tortuous “what if” articles on the eurozone‟s financial problems address the risks of collapse and contagion together with the inchoate political responses. Inevitably they conclude catastrophic consequences. There is no gain in further exaggerating this fairy tale, which is repeated to frighten voters into submission. The authors have risible track records on anticipating sovereign crises, despite the fact that from 2008 it was easy to foresee a series of defaults. The data was widely available; the ground work had been widely published for years (such as papers by Professors Reinhart and Rogoff on the Bank of England and other websites). Similarly, the euro‟s structural flaws cannot have been a surprise. Every scribbler had got there apart from those for whom it became a quasi-religious cult. The current cacophony of commentary remains backward looking so will again miss the key issue: default is good.

Without exception and throughout history, capitalism has been a creative-destructive cycle, and in practice this is also true of all socialist states. The G20 is a financial club of the world‟s wealthiest countries, which between them account for over 80% of global GNP and trade. Only 13 existed as independent countries a century ago, of which only two have not defaulted on their government debt since then. Many have done so more than once. Default is inevitable and cyclical yet rarely addressed. Current analytical paralysis is preventing discussion of the next and most exciting phase of this cyclical pattern - that default frequently results in great financial, economic and social benefits....
...MUCH MORE, including:

Quiz time
As usual the first correct answer wins a bottle of France‟s finest champagne if the winner is based in the UK; if elsewhere, a fine selection of business books. “Which currency(ies) is worth more than 5% today of their value in 1900?”

*Sept 26, 2011
Don't Sweat it Greece, Sovereign Default is Normal
Everyone knows* that the sovereign default of England's King Edward III bankrupted Florence's Bardi and Peruzzi banking dynasties in 1345. And everyone knows** that Argentina's default in 1890 brought Baring's bank to the brink of insolvency, staved off by the massive rescue operation organized by the Bank of England.

My question was how common are sovereign defaults?
I found a couple dozen answers in the bookcase and on the 'net but the most interesting came from Bedlam Asset Management.

First a short digression.
The first thing that strikes you is: These people named their firm after the most famous lunatic asylum in the world?
This must be a put on.
Then I read a couple of their market commentaries. They are good. It's not a put on.
I went to their website where the front page says it is for institutional investors only.
No problem.
I click the enter button and am greeted with:

 Welcome to Bedlam 
A website for institutional investors

This has got to be a put on. Welcome to Bedlam?
I go back and Google a couple more of their papers. They're erudite and comport with my understanding of markets, economics, finance etc.
So I click on the team page where I see this poor unfortunate:

 Richard Greenwood | Senior Research Analyst
  • 6 years industry experience
  • Joined Bedlam in 2007
  • Chartered Accountant
  • Lincoln College, Oxford
    - BA (Hons) in Classics
r greenwood Richard commenced work at Deloitte and Touche in 2003 where he specialized in tax cash flow modeling and due diligence reports for private equity M&A. His other experience includes academic instruction; from 1999-2003 Richard taught Classics, Latin and Greek at Wisbech Grammar School.

I swear to God he looks as troubled as SocGen's Albert Edwards trying to laugh.
Some of the other photos also appear just a bit off:

Robert Dann | Institutional Sales & Client Relationships
  • 5 years industry experience
  • Joined Bedlam in 2005
  • BBA (Hons) Business Administration, University of Kent at Canterbury
  • Fluent in Spanish and Portuguese
Robert Dann Rob first worked at Bedlam as an intern then joined full time after gaining his degree in Business Administration. Robert is also a Non-Exec Director of a London Wine Merchant.

I'm really thinking this is a put on.
But another part of me says "Hey if he is a director at, say, Berry Bros. & Rudd..."
All morning I've been quoting that line William Goldman put in Butch Cassidy's mouth as the posse tracked he and Sundance relentlessly:
"Who are these guys?"
Just a few minutes ago I was shown that they were vetted by FT Alphaville's Izabella Kaminska.
That's good enough for me....
Albert "Many Think I'm Mad":

Albert does not wear the devil-may-care look well:

Our Hero