this just in in-tray fm moolah manager
Right now we are seeing irrational exurberence in the world financial markets around the fact that the banks (can be inter exchanged with dykes for this little story) , have gone to a little boy (interject soveriegn wealth funds here) , to plug what is the first cracks in the breaking dykes !
The reality is that all those people living happily behind the dyke should be investing in scuba gear and boats.
The soveriegn funds have limited funds with which to support the ailing financial institutions , yet I hear so many layman refer to them as a panacea. The scale of the issues facing the banks and financial community are just too big .
I think it is only now, that in abu dhabi or beijing, they are realizing that they have been "had", no different than anyone of us that has invested in a "promote" to find out that the business was not quite as healthy as we thought it was.
When citi, ml, ubs pass the hat around - who will step up next time.
Or if they do , on what terms ?
I only hope that the big banks can make a lot of profit in the next 2-3 years , and raise more capital - in order to reinforce their tier 1 ratios and be ready for basle 2. In my industry , ship owners borrow tens of billions per year from shipping banks - who are only just waking up to fact that they have limited funds, and that these funds have a cost. Until recently the german banks had never considered their own funding costs , or credit adequacy tests (in fact they did not need to when had a big brother standing behind in form of state guarantees). They just made more and more loans , and took the margin and booked it as profit (the good thing is that they have also been doing same for commercial real estate ! ). Well today they now find themselves funding at a higher margin then these outstanding shipping loans (commonly called a loss) !
I am going to guess that if the rating agencies really get to look into some of these banks , they may start to question the true quality of the assets !
Well enough doom and gloom !
And I am still shorting the financials ! For I fully expect the second wave to come in next months. |
