Thursday, September 29, 2016

Compare and Contrast Perpetual Treasuries and Entrust Securities

There is a hue and cry about Perpetual Treasuries making over Rs5B, implying that it was due to the insider information given by the Governor to his son-in-laws company, and so fraudulent.

Now compare that with the fact that EPF gave Entrust Securities Rs3B(savings of the working people of this Country) to invest in Primary Dealing with a hope to make profits, and they have NOT even been able to account for the money!

Entrust had gone belly up, and been wound down, with NO information at present on what has happened to the money, and the case is still pending! This is theft, or loss on Bond Trading? Say it is loss on bond trading, then it is when bets have gone sour.

If anyone reading knows about Bond Trading, there are huge profits and huge losses to be made on a daily basis in buying and selling bonds, both in Primary, and Secondary markets, depending on the fluctuations in the interest rates. This Perpetual Profit could become a Rs5B loss next year or if the trades are good, can even result in a Rs10B profit. That is what this business is all about, and there are very few people who have the stomach for such business.

Perpetual is by far the largest non-bank Primary Dealer, and due to their vast capital guarantees, that their related assets in other Company Shares, owned by Perpetual Investments Banks are willing to give them HUGE overdraft facilities, to trade with. I know it was questioned how a State Bank like Bank of Ceylon, lent money to them, assuming that too was a fraudulent transaction. However they made money from lending to Perpetual, and lent it on normal terms assessing risk and looking at collateral, so NO wrong doing on the part of the Bank could be made, and the STATE BANK made money for the owners, namely the PUBLIC.

The banks because they are making easy money screwing the borrower and lender, with an impotent government that is unable to reduce the spread, which is an essential for growth of the economy, do not wish to go into risky bond trading, and their bond traders are a few cretins, who make or lose a few rupees at a time, and by HOLDING bonds potentially expose the bank to huge losses if they get the bets wrong too! These losses are cleverly hidden in the banks accounts, as their boards don't have the brain cells to enquire into profits and losses from each trade, in their monthly board meetings, wasting their time, approving loans!

We must look at the excesses, and waste of public money that goes on a daily basis, that directly impacts on why the Govt. needs to borrow more and more and that borrowing requirement benefits Perpetual Treasuries who are able to guess this insatiable appetite to waste public funds.

This is a classic chicken and egg problem. Before going after Perpetual I would advise the reader, and of course all those who like to blame companies that DISCLOSE HUGE profits, to go first at those who are responsible for Govt. waste, such as car permits, and those who don’t show their profits, and pay no tax! 

1 comment:

  1. Much of what has been written in the past year about the Bond Scam is hogwash, as most writers just do not seem to understand the whole process, and be able to asses the pros and cons of placing, vs, auction etc.

    Of course when an auction is newly established, when previously forced placing was the norm, there is always the need to arrive at a market rate, which only upon a period of months will settle down, once the players are more capable of assessing supply and demand.

    Mistakes may have taken place initially, which smart traders such as Perpetual anticipating them, have taken advantage of. The problem in this whole game is that you have ONE trader who knows what he is doing, and is willing to take massive risks, and you have the rest, amateurs, frightened of making a call.

    In this case the smart one made Rs5Billion, while the idiots lost Rs4B, and are now under investigation for fraud, by taking 3B of EPF money with no trail as to what happened.

    In light of this Bandula Gunewardena wants the profits to investigated! What a cretin? Investigate those who hide profits and income first, NOT those who disclose these at their peril. It is this sort of logic that has left Sri Lanka behind. We investigate the clever, and ignore the crooks, most of whom litter the Parliament in the guise of MPs.