Bankscaping

Friday, January 30st, 2009 Euronext 100: - 0.98%

18:45 - The Carlton hotel bar (quit the smoking, guys)

A corduroy man with a scratchpad wants to ask me some questions. He buys me a glass of overpriced merlot, in return for which I give him my views, for what they're worth.

Q: Will there be deflation or inflation?

A: There is a good chance there will be both, and that’s bad news.
For technical reasons, deflation comes first. Prices are staying flat, as consumers stopped consuming wherever they can, immobilized by fear.
But then the enormous financial packages the government granted the banks to pay bonuses to those who screwed up must come back.
Governments raise money by collecting more tax or issuing bonds. Either way causes inflation to return, with a good, but not inevitable chance this might turn into hyper-inflation, which would be a scenario for disaster. All it takes then another up-and-coming extremist, and you’ll have the thirties all over again.

Q: Is this a good time to buy real estate?
A: If you have your eyes on a place to live in, and one that is not in an area plagued by political instability or on the route favoured by illegal immigrants, it is an excellent time to buy. Take a mortgage with fixed rates, mind, or you might regret it soon.

Q: Will the oil price stay what it is now?
A: Almost certainly not. With the current price, it hardly pays to get the stuff out of the ground. A bit lower, and it becomes a loss making exercise. Oil producers are too powerful to let that happen. This year, the following factors need to be taken into account:
- For a number of countries this winter is the coldest since decades
- Most electric cars that are popping up won’t go into serial production until 2011
- Aeroplanes don’t fly on wind, at least not those that carry freight and passengers.
I would predict crude to be between 70 and 80 dollars per barrel by year-end.
Long term though, oil is a lost cause.

Q: Will banks change their way of operating?
A: Most banks are, by nature, conservative and as such learn too little too slow.
In 2009, they sadly will be extremely restraint in lending as well as investing in their own technology. Both are cardinal sins.
It’s not the lending as such that caused the current global recession. It’s the insufficiently regulated shifting of risks that brought us where we are now.
As for innovative technology, look at the business that are growing fast. Facebook went from 6 to 40 million users in less than three years. YouTube has more regular viewers than most established TV channels. Consumers behaviour is rapidly changing, and only those banks that understand and play into that will prosper again.

Q: Do you expect more big banks to disappear?
A: How many big banks do we really need?

Bush off!

Friday Jan 16th, 2008, Hang Seng + 0.09%
13.21 - with a sandwich

It's been a week of emotions.

There was disappointment.

I was disappointed to read, for example, that China will tolerate an increase in bad debt this year as it eases rules governing bank lending to revive the slowing economy, according to the nation’s banking regulator. The China Banking Regulatory Commission will drop its target of reducing the balance and ratio of bad loans after five years of declines, and instead aim to prevent a “massive and rapid rebound” in soured debts, Chairman Liu Mingkang said in Beijing on Wednesday.

Easing rules on bad debts? Hello...! Does anyone remember how we got into this mess in the first place?

There was also some reassurance to be found in a court case this week.

A Swiss man had been found guilty of abusing his grandmother's funds for more than a year. He had been given a power of attorney over her bank account to help the old woman managing her household, and had misappropriated 122.000 Swiss Francs which he spent on Zurich's notoriously expensive nightclubs. The judge sentenced him to a fine of 18.000 Francs, which in my book still leaves a positive result of 104.000 Swiss Francs.
Now there's a relief. Crime pays. And nicely too.

And finally there was some good news.

George Dubbaya Bush gave his final speech (at least he promised so) last night.
What a pity though that in this otherwise pathetic attempt to justify his wasted time in office, he did not let out a single gaffe anymore. And let's face it, that's what we were all waiting for.

I'm sure you'll remember some of these:

"Most of our import comes from foreign countries." (On a press conference on the economy)

" I say: the history is in the past now" (Interview with Larry King)

"What state is Wales in?" (When being introduced to Charlotte Church)

As it stands, this seems to be the major difference between Obama and Bush. One inspires the people, the other the comedians.

Still, much as I like political satire, I won't miss him.
There are those people who only exist to serve as an warning for others.
Every now and again one comes along. And while it's perfectly okay to ridicule them, see what happens if you vote for a halfwit like that?
Don't misunderestimate the consequences.

"..they've got internet on computers now....?"