Monday, September 20, 2010

A Sunny Place for Shady People

This was how Somerset Maugham described Monte Carlo in the 1920s and following on from our conference notes from Asia, we thought it worth a post on one member of TMM's trip to the Principality last week, for if it’s September it must be Monaco - well, it is if you are in reinsurance. We aren't, but it is nice to be invited!

Every year the hard working denizens of Lime Street, London and their lucky compatriots from "'hardly any tax, old boy' Bermuda”, plus poor souls from other far less prepossessing places (Columbus Ohio, anyone?) swoop on Monaco in an orgy of pointlessness. The Annual Reinsurance “Rendez-Vous” attracts many hundreds of movers and shakers. Well, maybe 10 or so really big-swinging dicks, and about 2000 hangers on, schmoozers and bag carriers – plus an endless parade of “independent consultants” - i.e. those who have lost their jobs in the real firms.

Why are they there? No one seems to have the slightest idea, other than it’s all about“relationship management”. But hey, it’s all on expenses! And what expenses. It’s all a dizzying round of dull champagne receptions where rotund insurance types discuss run offs and capacity whilst ogling the occasional Brazilian “secretary”, who always seems to be on the arm of some mystery underwriting guy. Apparently he’s very important but nobody quite knows who he is.

So what can we report on from this Mount Olympus of financial summits? Errr... Well, it would seem that if there is one industry that is looking to profit from the BP disaster its the the insurance mob who have suddenly been handed a new event risk to strap all sorts of new fangled insurance derivatives around. We know that the probability of a rare event reoccurring is always over estimated immediately after its occurrence, so you can sympathise with their sales logic. But should we be worried over the parallels between the blow up in the banking derivatives that caused the financial crisis and the current desperate scramble for "innovation" in insurance products? In Markets, "innovative" normally means a novel way of strapping the basics together in order to hide greater costs and spreads to the client. When we hear that the French insurer Scor announced at this year's event that it plans to offer insurance on yaks in Mongolia, we wonder if this is some form of Insurance sub-prime indicator.

And Monaco itself? Well, in a delicious juxtaposition, Barclay's continue to occupy the top end of Casino Square looking right down on the “venerable” institution itself (Vince Cable would be left confused as to which way to turn). Last year they were still Barclays Bank, but now the sign proclaims Barclays Wealth, so that’s reassuring. Of course Monaco has nothing to do with wealth. A rather brutal critic once pointedly observed that Stephen Fry is a stupid person’s idea of a genius – so it is, with Monaco and money. Only a financial dullard would believe that the Monaco Bling, Bentleys & Birds formula equates to real money. In truth the place is a sort of Eastbourne with sunshine. Ancient types drive fast cars in first gear, sometimes for up to two miles, before retreating to hugely expensive rabbit hutches of one bedroom and half a bathroom, whatever that is.

So there is money there then? Well only if you believe that owning a Bentley made by the same firm that knock out Skodas is a sign of wealth (a cursory glance of motor trade periodicals in the UK will show £40k secondhand Bentleys littering the forecourts of such outrĂ© places as Maidenhead and Stoke Poges). So who are these elderly drivers? Mainly the lucky small winners in life – those who sold the pasta factory in Milan for EUR 10million and, having fled the dreadful wife, are brushing up on interviewing Brazilian secretaries... Oh and of course the crooks. But no need to mention them much – they’re just so unimportant.

So Monaco drifts along believing in its own importance and shallow hype about it’s “mega wealth”. In truth, the wealth there is a fraction of the investment banks' bonus pools, and anyone who understands finance knows it and so is not remotely interested in the Grimaldi’s little seaside town. But what about the high rollers? Well, your correspondent visited the Casino (no, not Barclay's Wealth) and found the 5 Euro roulette table crowded with just four players and no other tables open at midnight... Hmm... One wonders if Eastbourne might not be the better bet for the Rendez-Vous boys next year? Does Sussex have any Brazilian secretarial services?


abee crombie said...

nice post... i like the stuff about insurance co's... makes you wonder how anyone can objectively value an insurance business without looking at the book and just using the financials (ie Bill Miller )

Nic said...

Didn't Bernie Madoff have a pad in Monaco and a yacht called "Bull".
Good post :)

Leftback said...

Bling, Bentleys and birds. A sort of time capsule of the British male fantasy of the 60s.

You'd expect George Best would have preferred to have lived out his last days in Monaco... "I had a million pounds and spent most of it on booze, birds and fast cars. The rest, I squandered".

Indeed. Mr. Best filled his boots..

Polemic said...

Thanks folks, and yes "Monte Carlo or Bust", Terry Thomas, "Dirty Rotten Scoundrels" or even its original 1964 version "Bedtime Stories" (and just cads in general), insignia'd blazers and cravats, David Niven, and that whole 60s , as you say LB, male fantasy. Ahhhh.... if only I was of that generation ..

Now what the hell is going on in the markets .. break out, jump on load the boat, mortgage the kids, yeee haaa don't miss the last train to Profit Central time?

Leftback said...

One hopes it will be easier to get out of Profit Central than it was to get in and out of Grand Central today...

LB visited three of the world's great cities recently. Only one of the three (London, Paris, New York) had no rapid train from the airport, taxi drivers who don't speak the local language, astonishingly poor and visibly crumbling transit infrastructure, inedible fast food and ubiquitously surly service that made the inhabitants of Lagos look polite.

Welcome home to Bananamerica, LB.