Wednesday, 25 February 2009

Critical thinking

Analysts – love or hate em, they write a lot of stuff. Sometimes it is interesting.

Not often though.

Alphaville posted up a long quote from one good analyst report yesterday (it has taken me that long to read it!). Labelled Bob the Bear from RBS.

Bob is a bit miffed that no-one listened to him when he saw the sub-prime crisis in 2006/7. But no-one likes a Cassandra. I mean I noted issues with securitisation in 2003 and house prices in 2004, as well as the problems with excess liquidity in 2005, and I’m not bitter. Oh no!

But I do have sympathy with Bob’s statement that:

"Forgive me, but I cannot see how talking advice from folks who couldn’t see this crisis coming even when the tsunami was starring them in the face can be of any real benefit."

Most of these people currently wail about apocalypse now, complain about bankers and say there is now a return of some kind (never very well detailed) of alternative capitalism.

Bob notes (correctly) that this year will see many more defaults, and this will challenge banks as much as some of the minor obstacles they have already encountered.

He also says that Europe will not be immune.

"Europe is in at least a big a mess as the UK/US - there is simply a lag. This applies to the banking losses/problems, the real economy, to ECB rate cuts, to the EURO (soon) taking up the UGLIEST CURRENCY baton from GBP, which in turn took the baton from the USD."


"All of which to me means that this is all gonna get worse before we get the next quantum leap forward in both full disclosure AND policymaker intervention, and before it gets better. And the REAL HEALER will be TIME and falling ASSET PRICES, combined with rather than because of any policy magic. In other words, rising defaults and powerful deflation will trump all/any (nominal) +ve’s for much/most/all of this year."

Of course, we could all give up on thinking and stuff and just hope ourselves into a better world.

No comments: