Reasons to be cheerful
10 Mar 09
This week I thought I’d take a break from undermining the fabric of Western capitalism and focus on some positive developments
Every so often I come across someone who, when it comes to assigning guilt for the economic state we’re in, includes the media in a trio of guilt (along with greedy bank chiefs and inattentive regulators). Apparently, the recession would not be anywhere near as bad if the press could resist the urge to “talk down” the markets.
To me this is just a case of “shooting the messenger”. Maybe we in the media were at fault for not being downbeat or sceptical enough when everything seemed to be going just fine, and we had got ourselves into an apparently never-ending virtuous circle of growth. You can’t blame the hacks now for the content of “bad news” stories. After all, the events would be taking place even if we weren’t reporting on them.
None the less, in the spirit of redressing the balance, I thought I’d focus on a couple of reasons to be cheerful this week. First, while nobody is going to be bold enough to call the bottom of the market for some time yet, a couple of recent stories indicate that bold investors are starting to see opportunity in the midst of the financial carnage.
Lansdowne Partners, one of the hedge funds that made millions from short-selling bank equities, has reportedly closed its positions on stocks like Barclays, HBOS (now Lloyds Banking Group, of course) and Allied Irish Bank. The implication is that the hedgies believe the slide in value of these shares may be about to stop.
Meanwhile, this week Standard Life Investments launched its UK Equity Recovery Fund. This fund, aimed at the bullish investor, aims to focus on “recovery” stocks like banks, property businesses and retailers.
It was also cheering to meet with Benny Higgins, chief executive of Tesco Personal Finance, last week. Higgins is busy recruiting for 200 posts at all levels as his organisation becomes effectively a standalone bank, having cut ties with Tesco’s former joint venture partner, RBS. It’s a vote of confidence in Edinburgh as a financial centre – Higgins’ new HQ is just round the corner from the ICAS offices in Edinburgh’s Haymarket – which the city badly needs.
In Higgins’ view, over the past few years the financial services industry, particularly in mortgage lending, focused on growth at the expense of profit and sustainability. He said: “People were chasing market share, which was pretty dumb, to be honest. Margins were unsustainably low and risk was unsustainably high… it has to be profitable, or what looks like a good deal for the customer won’t last.”
Profitable, sustainable financial services? It could catch on, you know.