We’re Busy Doing Nothing

Here’s a question. Has a bank ever made any money in the long-term for it’s shareholders?

Yes shareholders have had dividends along the way, but the banks’ share prices have been almost wiped off the face of the earth. For Northern Rock and Lehman’s shareholders all has been lost. I know it is in vogue to bash bankers, but it seems to me much of their profit in the past has been through cheating and gaming the system. Bank share prices rose because of record profits and ever higher dividend payouts. But those profits were often gained illegally and redress is due to those who have been ripped off. As a result share prices have dropped. I knew an individual who had a portfolio of banking shares worth more than £30,000…today there is less than £3,000 left. So let’s look at what they have done.

• There are the millions of consumers who bought payment protection insurance. That is going to cost the banks £15 billion.
• Several high street banks have shut their financial advice arms because of fines from the regulator and £millions due in redress to their mis-sold customers.
• The banks are guilty of selling complex financial instruments to each other and £billions is due in redress to other banks and their customers.
• Finally we hear that Barclays is guilty of fixing inter-bank interest rates, I’m sure more banks will be found guilty also. That effected anybody who had a LIBOR linked loan. Many variable rate mortgages and car loans are calculated on this basis.

All of above created profit and bonuses for employees. The bonuses have long been paid out and spent by the offenders and it is the tax-payer who is left to pick up the pieces for decades to come through higher taxation. This is because governments have signed as guarantor with our money. The RBS had a computer glitch which caused turmoil. Surely it was created to show the UK Government of what would happen if there really was a bank failure. “Don’t mess with us, because if you do we have the power to bring the country to it’s knees” Or am I just being cynical and twisting the events?

Like the Euro 2012 competition, the latest European summit resulted in the Germans losing. The Spaniards won 4-0, and so they can borrow more money without any strings attached from European bail out funds. So far so good, but will the market see it as anything but a short term pay-day loan. With 25% unemployment it is unlikely they will be able to pay it back. Ever. You can’t fix over-spending with a further credit card.

This may look like a rant by the way, but it is not. It is an explanation as to why I feel I am sat on my hands currently, and an awful lot of client funds still in cash. Clients entrust me with their life savings, if you were me would you be rushing headlong into the markets currently?

Seven years out of ten the markets go nowhere over the summer months. So we are busy watching global events so you don’t need to. It is painful at this end sometimes when it looks like we are doing nothing, but like the last post said we are ready to act as soon as events dictate action should be taken.