There’s a saying that volatility is not risk, that risk is a permanent loss of capital, and that price fluctuations are temporary until you sell and make them permanent. Well, maybe. If I bought Amazon at 400 late last year and sold it when it hit 300 this year, I lost out, right? Not if I put the money into Google—it would have recovered what Amazon lost.
When I was a kid I loved dot-to-dot books. Whenever our family would go on long trips, they’d get me a stash of dot-to-dots and I’d be all set. Maybe it was playing with numbers; maybe it was trying to recognize the picture as soon as possible—whatever it was, those books would keep me entertained for hours.
So maybe that’s why I find the Fed’s dot-plot so fascinating:
It seems like they’re mired in a mess of their own making. There’s no desire to go backward and de-integrate; there’s not much interest in moving forward with stronger pan-European institutions; but it’s economically unsustainable to stay where they are. At present, Europe’s economy is stagnating. As anemic as our post-Crisis recovery has been, theirs has been worse:
That’s what I thought when I heard that Emilio Botin, Chairman of Banco Santander, had died. Botin had been running Santander—based in Madrid, Spain—since 1986. His father, grandfather, and great-grandfather had all been bankers. He took what was then a sleepy, regional bank and built it into one of the largest banks in the world. He was a canny manager, acquiring Sovereign Bank in the northeastern United States for $3 / share in late 2008, when it might have cost $40 / share in 2006. And Santander weathered the Financial Crisis well, never taking a bailout, and never cutting its hefty dividend.
That’s the question Scottish voters will decide next week. If they vote to secede from the United Kingdom, Queen Elizabeth will remain Scotland’s nominal head-of-state, but pretty much everything else is unclear. Like Quebec’s vote on independence 20 years ago, Scottish independence is an emotional question, as well as an economic and political one. Then as now, a long-standing separatist movement appeared to gain significant momentum shortly before the referendum.
Yes/no opinion on whether Scotland should be an independent country:
Bankers have always had to adapt to new technology—whether it was drive-through tellers or debit cards or ATM machines. But the mobile revolution creates especially significant demands. Now, almost half of all depositors prefer to manage their accounts via PC or cell phone. By contrast, five years ago only a quarter of their customers did their banking this way.
In 1970 the global median age was 21 and there were 70 people per square mile. By 2020 the median age will be 31 and there will be 150 people per square mile. This means bank customers are looking for different kinds of services. Older customers tend to be wealthier and need ways to manage what they have.
The easiest changes to see are regulatory. Regulators have massive influence on how banks do business. From standards on loans to borrowing to capital, the overseers have been raising the bar.
And it needed to be raised. One of the causes of the Financial Crisis was lenient regulation. Regulators assumed that market discipline would keep the biggest institutions in line—that firms that mark-to-market every day didn’t need as much of a safety net. Well that didn’t work out so well. The first firms to fail were trading institutions: New Century Mortgage, then Bear Stearns’ hedge funds, then Bear itself. The failures and bailouts ballooned after that.
Bankers got a black eye in 2008 when the nine largest US banks took government money to shore up their capital. The US banking system was facing a crisis of confidence that was causing an institutional run on its liabilities, threatening to turn the economy’s recession into a depression. While it was controversial, most people believe that the bailout helped avoid a much worse economic outcome.