PERSPECTIVE: Investing with Historical Perspective....
In these days of bewildering array of market news, media hype, on-line news services, what is an investor to do. I tried to look back and tried to find my answer in History.
Would you invest in Rail Roads today? Perhaps yes, but an investment in rail roads over the course of last 60-80 years would have proved disastrous. When companies like Ford Motors came into being, the prudent thing to do , even for Rail Roads, was to invest in the automobile industry. The rail road industry defied the onslaught of the automobile industry at the beginning saying that the automobile was only good enough for around the town and that long distance passengers would still be all theirs' anyway. So they kept up an upper stiff lip and moved along. Over time they offered local service by car/bus to ferry people into towns. Not quite like riding the new wave.
When I look at the banks, I think of the rail roads. So where has all that college education at Harvard gone. We are still caught in the rail-road syndrome and very few of us are awake to importance of the History and what it is trying to teach us. The educated MBAs of major banks look at the Internet Challenge much as the Automobile Challenge was looked at by the Rail Roads. First they want to protect their business. So they bring the internet experts on board and put up nice and snazzy web-sites to ENHANCE the BRANCH BANKING that has been their main stay. It is akin to the rail roads buying some automobiles to take people home from the train stations. It is not going into the automobile industry as investors and bringing the fruits of the automobile to the average family. Things don't change overnight, of course. Lot of people will continue to ride the old train for a long time till the automobile shows up in the neighborhood or the next door.
One big bank (RAIL ROAD) even went so far as to sue an internet bank (AUTOMBOMILE) for what looked like an infringement of the big bank's trademark in their dotcom presence. The case was settled out of court mostly because the little bank did not want to waste their small resources on a legal battle.
So what is the automobile look like today and how is it going to change over time?
The answer may lie in History again. The People won out. The People got what they wanted and the Automobile industry tried to satisfy them the best they could.
Transportation was the function then and it was satisfied in a convenience first, style, economic way.
Banking is the function now and the traditional banks are offering convenience, style but not the economy.
To compete with the Traditional Banks the Internet Banks have a bigger battle at hand. The have to deliver on all factors involved:
Convenience
Style
Economy
Convenience: There will always be people who LIKE riding the train. But in the new era, there is a younger crop of people who would rather telecommute than ride the train. Some would rather order groceries from home and have them delivered. This latter group is a very good target of the Internet Banks. The meaning of convenience has changed. The banks may not have much of an advantage with this group ON THE MEASURE OF CONVENIENCE.
Style: You be the judge. The dotcom banking does have a ring to it as well but so does" my teller says..".
Economy: This TURF BELONGS TO THE INTERNET BANKS. With no branches to maintain and with little need for tellers, the Internet Banks have a very low cost structure. They generally offer FREE banking meaning there are little or no account fees, and there generally is Interest Paid on different kinds of accounts. This is where the BIG TRADITIONAL BANKS have a BIG disadvantage.
The question you still have to answer is : where would you invest? |
