The Davos Forum and the Financial Crisis Thinking of the CEO’s

davosThe World Economic Forum (WEF) has become a sort of pilgrimage for all sorts of real or would-be gurus. Which is not bad at all if you think a little bit – at least you find out how most of the world business leaders think. Or what is what they want us to believe they think.

Well, we here at like charades, so we thought: why shouldn’t we try to read among the lines of the 2009 Davos WEF? Afterall, everything is a matter of interpretation, and most world leaders have an expression these days – the crisis is only in our minds and when it will be over there, it will soon end also in the real world.

JP Morgan Chase, one of the survivors of the recent bank shakeout in the US, has “plenty of capital”. Or so declares its CEO Jamie Dimon in a speech held today in Davos.  Underlining the bank’s confidence, Dimon said JP Morgan had lent $150 billion in the last 90 days including $50 billion in the interbank market, also to European and British banks, but added: “It’s scary because at the end of the day you have to survive.” “I’m hoping by the end of the year we’re coming out of the crisis,” he told to the present journalists. All the other declarations from his side, though, looked a little bit avoiding. Like the one regarding the China-US trade imbalance, where he said that both parties have gains and losses from this trade.

Well, ladies and gentlemen, this was the CEO of one of the biggest banks in the world, coming into the light of the Davos WEF with some really stoopid declarations. First of all, we all know that the surviving banks have plenty of capital, after all we, the taxpayaers, financed that. Of couers, Mr. Dimon was prudent enough not to mention how those money will be used – and this is actually the question – why do the banks refuse to grant more credits to the public and so to jumpstart the economy?

The answer is again in the above mentioned declaration. When you, as JP Morgan Chase, make a lot of money from your good investments which are actually simple placements of your capital with other (state-guaranteed) banks, you don’t need to bother yourself with the army of citizens which need to be analysed, pushed money to and then monitored until they give them back. It is easier to lend several billions of dollars in one turn to another English bank, which will pay you a hefty interest rate for your money. This is a good investment advice, don’t you think? If you have money, lend them to the banks!

Other companies are smarter, but still looking for easy to do business deals. Take for example the investing strategy of the US electronics retailer Best Buy. Another piece of of a good investments strategy is not to find out ways to sell more electronics. No, brother, they are looking for bargain retail spaces, left vacant by other bankrupt retailers. Which probably have gone bankrupt because of  excess sales which left them without working capital :). Leaving the jokes aside, the current real-estate freeze is a fantastic opportunities for the companies which have cash AND continue to generate it for the foreseable future. Assets have become very cheap, which makes investing in them very attractive for all sorts of predator companies…

As regarding the U.S. economy, Best Buy’s CEP Anderson said that “we are probably close to a bottom,” but sees the “risk of another real estate move down.” Another prudent and empty statement…

But not all the guys out there are pessimistic. Nasdaq OMX Chief Executive Robert Greifeld expects 2009 to be strong and looks for opportunities in Asia. We also recognize that the interest rate swap market, that over-the-counter market that we are focused on, is a truly global market and represents opportunity for us not just in the U.S. and Europe but also in Asia,” he said. In other words, it is a great opportunity to export your crisis model to other economies, it it looks like a nice investment opportunity and generates money for you.

The failure to have a counter-cyclical capital adequacy system in place, the failure to have enough capital against the trading books of banks … I think that was a fundamental mistake,” FSA chief Adair Turner told Reuters Television at the World Economic Forum in Davos. This failure recognition comes maybe a little bit too late – but worrying too is the fact that the same solution is applied in relationship to the toxic assets of the banks. Further nationalisation is foreseen by most of the governments, with the U.S. leading the pack with its plans to create a “bad assets” bank which will buy the troubled guarantees from the troubled banks. What will they do with these hot investments afterwards, nobody has a clue…

But some people seem to be really pessimistic about the future of this financial crisis, who has been already prolonged over the level of the 1982′ one. Rupert Murdoch, chairman of the famous News Corp, said today in a Davos speach that the financial stimulus packages will fail, since the Great Depression was ended only by the economic boom generated by the World War II. Although cinical, this view has a bit of truth in it, since also in the 1929-1933 crisis the big recovery was sparkled indeed by the war production…

So plenty of things to chew on these days. Especially when you have most of your investments tied in real-estate…

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