Another depression coming? Or a lengthy recession?

Nobody wants to hear that we are heading for a depression. It conjures images of famine, tramps, extreme poverty, hyperinflation- a nightmare. The scars are numerous and although there are not many people alive today who have gone through the last Great Depression, everybody knows that this is not something that you want to be in.

I have been asked a few days ago what the solutions to our current situation are. The truth is- I don’t know . And before you start throwing tomatoes at me, let me add this: anybody who tells you he/ she knows is probably a crystal ball reader, or in other terms, a liar. Why? Because we have never been in such a situation before and with every new day, a new ” solution” is being thrown in our faces by our governements. As long as there is no pause in the process, there is no way to stop and figure it all out.

Of course there are some possibilities. The first one is that we are entering an era of deflation. ( That’s not good. We ” need” a minimum of inflation to have the markets growing and entrerpises expanding). But with all the money printing by the Feds, the ghost of hyperinflation is lingering in the background- and that’s not good either. It when your savings or your salary is not worth buying a peanut anymore. I am not an expert on currencies but the volatility of these markets are not helping either. And let’s not talk about the details of productivity, interest rates kept low, inexistant savings and more borrowing ( we have now gone full circle- more of the same is not going to make it go away).

By not allowing the banks to fail Mr Paulson and Mr Bernanke have created a monster. We have been told by our governants that they couldn’t let the situation follow its course. If we had, it would have been worse and immediate action was required to prevent a worse future. Of course it doesn’t make sense. By protecting the banks that were meant to fail, they put tremendous pressure on the banks that hadn’t committed the same mistakes. Even worse they are saving companies that do not deserve it (  great example to set) and will probably not learn their lessons ( follow my lead, what happened to Enron? Or LTCM…deja vu someone…?)

Now if anybody thinks that this is going to work…Well, think again. Did it change the situation? Did it allow the markets to turn? People to keep their jobs? Retails to sell their good? Banks to get their loans and mortgages repaid? What good did it do exactly?

You can’t stop a running train. It is even worse with a wild beast. It usually kills some before it gets killed.

So here it goes. We should hit the wall and then we will get up. Governements are trying to stop this but it looks like they are only creating a delay. It will probably happen anyway. But why did they intervene really?

Who is happy to see those banks stand up? People who have their savings in them, that’s right. But if we have our life savings being swallowed up, most of us have to keep doing their day jobs and struggle some more. If the very wealthy ( the 2% who owns the 80%) go into the wall, what will we have? Interesting idea, don’t you think?

The Madoff affair gave a big clue to this. The SEC didn’t respond to the party poopers whistle blowing. Bloomberg’s articles explain very well the why and the because of this. Who were the ones who had every interest not to know and keep the party going? It is the old history of greed. But what is sad is that the ones who should be punished end up being rewarded.

To end this rant, I would like to point out one thing. So far most depressions have ended up in a war. It created a solution to all the problems ( alledgedly). We think ourselves too civilized to take the arms again but I would suggest that you think twice about this before dismissing the idea. Look at Israel/Palestine, Russia/Ukraine, China/Japan or even USA/ South America. How quickly can a situation escalate?  Of course I am pessimistic here, am I not?

But I can do worse. If there was to be a war…Can we afford it? I am not talking about weapons and money here, I am talking about potentially erasing a generation or two of an indispensable workforce in the Western world. A majority of our population is getting older and we will need young people- to pay for the retirement pensions and to answer the needs of the elderly. If we were to damage our human assets more, what could happen?

Of course we are civilized. Of course. Something will turn up alright in the end and we will win the lottery. Good night and good luck.

I’ve been around a little and this is what I saw

I went from the Uk to Tuscany riding across France and Switzerland and one thing that I’ve come to realise- with horror- is how much people in general have no idea and no clue about what is going on in the economic world. Of course I herad it all and the explanations were varied. Most blame the US and their credit crunch- but when asked what they think the cause of the credit crunch is, you have a blur momentum. Some tell me that it is because banks lended money to people who couldn’t repay the loans. Some blame the traders who suddenly shorted the markets. Some said that banks had been to greedy. But the truth is that a big majority is reading, watching or listening to the media and not many of them knows right from wrong. Now I see on Yahoo that traders blame Greenspan as when he was at the head of the Fed he kept the interests low. But then you have also people like Clinton ( Bill, not the female of the species) who wanted to make housing more affordable to the mass. Seen now it looks like a greedy and stupid bet- how could workers who couldn’t repay a mortgage get access to one? Was it only a move to boost the economy as when you buy a house, you usually undertake some works on it such as painting, re roofing, adding bathrooms and washing machines and curtains and all these things are being sold by shops that employ people who then get more work because you have more spenders improving their homes so suddenly you expand your business because everything looks so good and in order to do so – you foresee a better future but you don’t want to save and wait as somebody else might have taken your spot by then- so you borrow some money too and hire some people to create your new business place and then hired some more people to work for and with you…Do you get it? Now you do. Was it greedy? Was it then common sense? But what happened then?

Well, nobody wanted to see the train even slow down. Greenspan kept the interests low so more people could afford what they wanted. But people wanted then more – it’s called human nature by the way- and instead of buying primary goods ( necessities if you prefer) such as a house or a car to go to work only, they started thinking that borrowing was so cheap and saving so useless ( not worth saving when interests are so low…) that they added to their burden holidays, boobs jobs and wedding bills. In the Uk I wouldn’t be surprised if booze was added as the alcohol consumption went through the roof- probably in order to forget that at the end of the month not so much was left on your bank account. Anyway the spiral went faster and before you know it, all sorts of weird ideas came up. Banks invented new ways of spreading the loans and sell them, disguise them and resell them to all sorts of companies. Bankers and traders and CEOs got all sorts of bonuses at the end of the year for no good reasons at all. Landlords grew out of every corner of the Uk as they started seing the light- aka, your home can become your retirement pension. Some noticing that they might end up with some cash but no roof above their heads decided to buy two houses – or more- and get the mortgage repaid by the rent of people who couldn’t or wouldn’t afford getting a loan. Between the big bonus and the low rates suddenly everybody and their cousins wanted a home, a secondary one and if possible another one for good measure – and the kids or whatever. Prices went up drastically but the complaints were silenced as all could see their investments grow almost by the hour. If you didn’t possess your house you were a loser.

Governements in all that were quite encouraging. You could hear Gordon Brown while he was a chancellor boasting about his great results. All that had to be done was keep the interest low, loosen up some regulations within the financial sector and borrow yourself up to your eyeballs and possibly beyond creating new jobs in the public sector, paid by ever increasing taxes, in order to get the economy expanding a little faster.

Of course this game is as old as the world. Some call it the pyramid, but it is better known by the airplane game name. The airplane game kept crawling back for a few decades until it was officially declared unlawful and illegal. the concept was simple: you took one head. He had to find 8 people ( for example- as sometimes it was 5, 6, 9, 17…It depended on the sums involved and the places) who would give him something like 100£ each. He would made himself 800£ just in a few phone calls. All these 8 people had to do was the same; they had to find each 8 guys or gals who would give them 100£. These guys would have to do the same. So the airplane would fill up quite quickly- until it would be so heavy that it would actually crashed. Because sooner or later, some of the guys wouldn’t find 8 people to participate or who wouldn’t have participated already. Sometimes a twist was added; at each new participant, a % would be passed on to the one who was in the position in front of you, forcing you to find new people in order to get a bigger %. I heard about that game for the first time when I was 13. I declined to get on board and I got a few angry friends. But that plane crashed soon enough and all the ones after this one, only faster. Nowadays you still see messages passing telling you to pass it on to a certain number of people you know otherwise you break the chain and you go to hell/ get some unlucky events happening to you/ will break someone’s heart. In case you don’t know, these are also illegal. But I disgress. My point is- knowing that even on a small scale the airplane game is bound to crash, how could well educated people and less well educated governments do the same at such higher scale?

So on my way to Tuscany ( which is in Italy…just saying that for the ones who believe that Zapatero is the same as Zapata), I stopped in France and Switzerland. And I discovered that the blame is well spread, but despite this, nobody’s too sure of what is happening. I’m going to be frank here, I’m no genius and I don’t know either ( it’s a trader’s rule. If you don’t know, you don’t have any preconceived idea, so you don’t have a set mind to ignore warning signals and get it awfully wrong. It has become second nature, I know now that I know nothing). But the degree of denial was staggering.

A friend of mine had to renew her mortgage loan this year. She called me and asked for advice, although she proffess that traders are similar to vultures and bring only doom upon the world. I think she once called us/ them ” useless bugs”. Anyway, she wanted to know if I had any advice. I said I had none, but…Well if it were me, I wouldn’t keep a variable rate in the UK as everything was definitely going down the drain ( we were at the beginning of 2008), including housing market, employment,with high energy prices and galoping inflation. The situation did look dire- and I said so. I expected to see the whole world dragged into it by the summer. She asked a few questions, thanked me and that was it. When I saw her five days ago, she told me she had opted for the variable rate as in switzerland it was still at 3.5% when the fixed one was at 5.5%. She thought it was madness and was proud of her skills. I didn’t say anything as- as you know by now- I don’t know anything anyway. i just wondered how high does her bank expect the rates to go up even they have already hitched the fixed rate 2% higher than the current one. In my view, this is extremely worrying. But maybe she did the right thing and maybe central banks are going to save the fiancial sector. Who knows? I just know that banks have been so far working for themselves, not for their clients, and as I had explained to this friend in particular, they are not a charity. she was pointing it out that the banks’ best interest resided in the fact that without loans, they wouldn’t make money. So they had to lend money to people in order for them to keep the business going and the whole wheel ( see above) to turn. That’s when I answered that banks are not charities. Some people – a lot of them now actually- can and have defaulted. Banks are losing money. They are going to try and recoup these losses- one by getting rid of the worst loans and repossessing, two by hiking their rates higher and keeping only the customers who are able to pay back. They will have to compensate their losses. Something most clients don’t get.

But these misunderstanding can go deeper. Lots of Swiss people have lost their savings in the current crisis. Their bank placed all they had in what they wanted and asked to be ” a safe investment” that turned out to be derivatives from Lehman brothers. Such investments it seems had been made as late as April 2008. The banks in question affirm that by then , they had no clue that Lehman was in trouble. I say…Excuse me? I knew in december 2007 that the trend was down and had a chat with my own banker by then. If a newbie like me with no knowledge in economics is able to tell, how come profsessionals alledgedly were unaware? One could think that they knew and simply palmed it off onto their customers. And as far as I’m concerned, derivatives have never seen as a risk avoidance technique by the fiancial world itself, so if I were one of those clients, I’d kick a hell of a lot of a fuss.

In Italy the ostrich method is on full display too. Everybody complains, nobody does anything about it. I heard a banker from my Unicredit office tell over the phone to a customer: ” Where did you hear that? On tv? Well you know with the credit crunch in the US you know with these stupid Americans who borrowed more than they should have and their banks that have given them money they couldn’t get back, well, it has scared a bit the rest of the world, but don’t you worry, here everything is fine, we keep doing business as usual and you should go out a bit more and not worry, and if you do, call me back but within office hours only, and you’ll see I’ll be telling you again how fine we are. Okay…?And your mama, she’s alright?Great, take care now, ciao”. Unicredit is having an extraordinary reunion this Sunday to discuss and set up a re capitalization among a few other problems. According to Berlusconi, nothing to worry about. If they do it now it is to avoid problems later- it is just routine. Who’s buying that when at the very same time European leaders are meeting up to discuss how they are going to bailout their financial sectors and rebuilt a drowning economy? But as my Italian lawyer put it, deficits and debts are not registered on the companies documentations and reports otherwise shareholders would soon get rid of their stocks and the company would probably have to be declared bankrupt within a week. Interesting twist.

My Swiss banker was wondering why gold was still so low and why credit card companies were still alive. According to him, that was the next step ( one I had told him about in August 2007 but I guess he didn’t hear me) and he was sure that the problem was quite well advanced and worrying that it even might be worse than predicted. I passed on the rumour that in the US credit card use might get suspended pretty soon, which obviously made him even more nervous. ” But the media are not talking about it” he said. ” Maybe they have been asked to keep schtum, I replied. After all, if they dish the dirt and we have another panic, what do you think would then happen? “. ” gold help us!” was his answer. ” Well, let’s be charitable here. Maybe they remain silent simply in order not give the idea to the ones who haven’t had it yet [ to pay their bills and debts with their credit card when they can’t reimbursed the money]”. I could feel him freak out over the phone. As for gold, hedge funds and big funds are trying to pay their margin calls, so how do you expect to raise the cash quickly? The momentaneous lift of the dollar is not helping either, but when you can’t buy shares because it is too dangerous, you don’t know where to invest because the whole world is slowly falling apart, what remains the safest bet? No, putting cash in your mattress is not safe anymore nowadays, not when you have inflation running that high- your money gets devaluated in no time ( just have a look at Zimbabwe if you don’t get it). Plus at the fast pace the Feds are printing their money at the moment, it is going to be hard to keep up!. So yes, gold is what everybody knows, since the end of time. I’m not saying you are going to make tons of money with it, I’m just saying that it will cover your ass.

I am going to go back to the UK next week. Looking forward to it, markets are extraordinary volatile at the moment and as an intraday trader, I like it. No swing trading as nobody really knows where we are heading. I have no clue either, I just see that even with a bailout on the cards we still have a housing market that keeps falling and a big bunch of people who are getting laid off, so I’m not sure the problem is being properly addressed. I see though that the system that has put up in this crap is being supported at the cost of the taxpayers ( say thank you taxpayers, now you have to pay your credit twice and as for me, who never ever made a loan in my life because I was told as a child that it would only bring you misery, I will have to pay for you too, so thank you twice), so I’m not sure that our dear leaders have a good grasp of the situation. What good is it to cure the symptoms when you don’t even look at the cause? May I suggest that instead of having a bunch of political leaders, some bankers and Feds and senators – the whole band of funny bunnies who created this mess in the first place- debating together, you get the same bunch, add a few normal people ( such as me) and to make good measure a good dozen of kids and you get them to explain to us what they intend to do in great details until we get it and WE AGREE? Because at the end of the day, it is us, the normal people, and them, our kids, who are going to pay ultimately the price of this. And if I pay, I’d like as well have my say.

After all, you know, if Palin can do it, why can’t I? I can give you the list of newspapers and magazines I read evry day, every week and every month, and I don’t have an ocean between my country and Russia, but I’ve had a passport since I was born and I made good use of it. Better still, I know that …I don’t anything. And I will do whatever it takes for the good not only of the Americans but also of the rest of the world.

The last of the idealists has gone

Time has gone by so quickly that I didn’t realised that Randy Pausch had left us. He did actually in July- so quite some time has passed. But I just wanted to remind that this guy was trying to make a – small- difference and for the effort I believe he deserved respect. He was an idealist to the end. When asked what last message he would give to his readers he said: ” In lieu of flowers, use the money to increase your life insurance if you have kids”. He might have had in mind his own but that was still a selfless remark.

I am sorry he’s gone. We need more people like him. I am truly sorry for his family.

http://en.wikipedia.org/wiki/Randy_Pausch

The way the medias go….

….is down the drain. Ok I said it all. but what makes me mad about it?

– I don’t expect the majority of people reading the news to take the necessary time to question what they read. This frightens me. example: Gordon brown has spent his summer holidays in a village called Southwold on the Suffolk coast. I visited it a few months ago and it is a very nice little place with a lot of tourists. I personnally prefer Aldeburgh- but let’s be honest, Aldeburgh is more well know for its culture and Arts. I don’t expect Gordon to fit in such a place. Now, this said, he has been seen as a model of virtue for not going to Tuscany or France like Blair used to and keeping such a low profile. In my view he tried to set an example but it was a little too late. But here you go; Yahoo news then publishes some statistics for this year, saying that dear old Gordon has set a magnificent example by encouraging his people to do the same and re discover the charms of England ‘s beaches. But has he? Truth is yes- but not the way he expected it. Given the choice, most Britons would prefer California or Florida’s beaches to England’s- but they don’t have the means to anymore thanks to Gordie here and his great financial decisions during this last decade. Are they really thanking him for having their opportunities reduced? I doubt it strangely. And to be frank, had Gordon gone to Fidji or Bali or Santa Monica, do you think the news would have praised him for his decision?. Now to finish the Yahoo news, it was added that this year alone tourism has gone down 14% in the Uk alone. American tourists cannot afford coming to Europe or the Uk anymore as the dollar has gotten particularly weak ( and let’s face it, Americans are in serious trouble right now economically; their housing market has been plunging for longer than ours). So Gordon might be more cunning than you expect; by encouraging – or should I say forcing- Britons to wanders on the roads of England he simply replaces American tourists by Uk ones. Genius. I am quite sure that he didn’t do it on purpose.

This one tiny example of what one article can do. You read it in a minute and then you forget about it. But the facts are quite different from what they are made out to be. How many articles do we read in a day? And how many do we question? Bottom question- which side are the medias on? Because at the end of the day that’s what it is all about.

SAVE THE WORLD

I don’t know if any of you have noticed but it seems that not another day can go by without some hint that it is time for us to try and save the world. You are told to recycle, to send money to charities and to stop wasting energy. It all seems well and good- until you get into details. Recycling is accepted as long as it is clean. It means that you have to wash all the plastic and glass you are throwing away. Great, I am now wasting water. I try to save water you know. I have a 200 ltr water-butt filled up with rain from my drainpipes. I used it for the garden- I grow my own vegetables, fruits and flowers, all organic of course. I clean my bathrooms once every week and do a quick swipe in between. I make sure that my dishwasher is loaded before starting it and I turn it on only while I am still awake so I don’t let it on all night. I also try to save electricity. I turn off the lights when I am out of the room. I try all I can to save energy.I don’t use my car for unneccessary travels. I used boxes for my weekly shopping. I encourage my family to eat properly and not to waste food. I recycle clothes from one kid to another then sell on Ebay what is still in good shape- or hasn’t been worn. I give my magazines to other people, toys and books. I use less cleaning products or reduce the doses. The list is almost endless.

But then you learn that aiplanes companies are not taxed on petrol and they send their aiplanes empty accross the world in order not to lose their spots. Oil companies poison civilian waters while refining their products. Even desalinization might create sulfuric acid rains. Big companies are fined if they trespass their pollution levels- which they do happily as they don’t want to reduce their waste. You start to wonder- what is the point for us to make the effort when most of it is made useless or barely compensate the waste created by those companies? Better still, are these entreprises run by human? Don’t they have children?

I am realistic. I have noticed that some countries are more active then others. Islands have a tendency to be aware that independency comes at a cost, but rich countries such as Switzerland feel totally unconcerned. They may complain about climate changes but that is because the snow is melting on their mountains and it has become harder for tourism. But the population feels rather unconcerned about the future and/ or any form of emergency towards amending our ways of life.

What strikes me most is that the medias are campaigning harshly but at the same time the good news are widely ignored. Tornados and twisters bring to the surface an algae that purifies the air. North Dakota is discovering huge amounts of oil on its land- that has been untouched. The current petrol crisis is forcing entreprises to fund research for renewable energy.

An economical factor though doesn’t seem to make its way to the mass though. There are more and more people on earth, and like it or not, we will have to make room for them. It also mean that we will have to share our heritage and that the costs of life will keep increasing. Luxuries will become rarer and more expensive. It is a reality.

Ultimately you have to know we are living on borrow times. The future is going to be our children’s present. You may want to ignore this, but the only way to become immortal is to keep your children and grand children alive. Do you want to be remember for genocide? i don’t think so.

Of course I am a bloody idealist. I have five kids, haven’t I?

The banking world as we know it is coming to an end…Isn’t it?

So the end of our economic world is near. UBS and the likes are publishing numbers that the common of mortals can’t even conceive – and it seems that the losses are far bigger than any past quarter benefits results we ever had in the past. 37 billion $ subprime losses for UBS now. Lehman brothers is asking for a raise of 4 billion $ to re capitalize. Societe Generale hasn’t been able to reach the amount it was looking for after the amazing exploit of its star trader Jerome Kerviel. And let’s not talk about the common people who not only end up with a galoping inflation at every level – food, energy and taxes for the ones living on another planet- but still have to pay mortgages that they were most of the time barely able to repay in the first place. Are we having fun here or is it just the beginning of the fun? Central banks are injecting billion in a system meant to become extinct anyway. London city house prices are falling as well as US ones or Spansih ones. Europe struggles with higher prices as well as China. The Fed might end up regulating the system but even a purge will not make the bad mortgages go away so easily. Recession is near say our officials, pulling desperately an alarm that has run out of battery. The markets in the meanwhile play the yo yo, playing hope on the darkest predictions and numbers and taking profits as soon as the sun shine. I hear traders being blamed for the end result. But the truth is that we all are. The cheap credit? Between the bank who liberally lended money to anyone without discrimanation to the same ones who thought that a third tv, holidays in Majorca and silicon breast were a necessity, who is more to blame? From central banks to Warren Buffet who used interest rates to boost an economy in need of a correction to the people in the street who are convinced that they deserve better because they never set a foot in Africa, who is more responsible? From an era of after war where it became a rule to have rights before duties, who’s guilty?
Now the cheap life has come to with a hidden hefty price tag as well as the ozone layer is in need of a patch. Tomorrow looks bleak indeed and no one really knows for sure where we ‘re going or- for that matter- how it is going to end. My wild guess is that we have to brace ourselves and be ready for sacrifice because despite our wonderful new technologies and abilities man has still desires of grandeur that can’t always be fulfill.
I predict that we may have a few more months of turbulences and maybe even of small victories in the markets, but as everybody should know ” la roche tarpeienne est proche du Capitole” . For the English speaking only, the higher the climb, the harder the fall.
Bugger.

Having it all…

In our society – western I mean- women are lucky. We have it all- most of us. We are allowed to go out even at night and choose our own clothes. We can even wear mini skirts and plunging necklines if we want to. we can put make up on without being asked how much we charge in the street. We can go and study for as long as we wish ( or we can). We can ask a man to marry us and we can ask for divorce. We have a roof above our head and we don’t have to live with our parents until we find a husband. We can raise our kids and get a job at the same time. We can decide if we prefer to live in a city or in the country. And when we retire we may have a pension. So far so good. I can see most of you nodding- yeah, right, so what?. So I’ve got you. If you haven’t noticed that you agreed from the beginning with a simple allegation ( ” We are allowed to go out…”) then it means that you know something that most of us women already know. We are second class citizen. Even in our nice western world. And let’s not talk about the salry’s discrepancies.
Ouch now, am I a bloody feminist? Not sure but I can tell you this: I was naive enough to believe all this crap. I thought that we were lucky because we could have it all. I have been travelling to India, to Asia, to South America and in a few other parts of the world. I was so happy to have been born in Europe because I could see that I was free, compare to these poor souls, I was even more free than the men. But I was then young and I didn’t know that there is a price for having it all. Because it literally really means that. When you are a woman and you are as lucky as I am, you still end up doing more chores in the house then a men. I can see men frown, but except for the odd one who lives alone with his child(ren), I would like to see one guy tell me where his daughter socks or gloves are – before checking. I would like him to tell me how much flour is left in the kitchen. I would like him to tell me when was the last time the sheets were changed. I would like him to tell me when was the last time he dusted the house or cleaned the toilets.
Ok, your wife might be ” just” a housewife who stays at home and look after the kids. You are the breadwinner and you deserve some rest. Granted. Now, tell me, how many hours is your wife working per day? and if you think that looking after the kids is jsut pleasure, go and find out how much a nanny is paid. And tell me the truth- how many people would actually prefer reading a book or go to a movie or go shopping or read a book instead of looking after the kids 24 on 24?
Now I have it all. I am not sure that I am so much a feminist but I know that in order to have it all, you have to find a man who is as naive as I am and believes that women have the same rights as men. So I got one – the unique specimen?- and although I still have to show him the socks on the floor and that doing the dishes doesn’t mean putting it next to the sink, I know that we are sharing this world and that I have his support in all my endeavours.
But boy, that’s hard work. And for the men reading this, for the sake of fairness, yes I still ask ny husband to open the jars for me and to get the bins out. Told you I had it all.