The banking crisis is it all doom and gloom – MoneyWeek

2020年3月25日 at 下午10:24

TimPrice(DirectorofInvestment,PFPGroup):I’mnotsuretheFedhasanyalternativebuttocontinuetocutratesaggressively。

ButinlightoftherescueofBearStearns,there’salimittowhatmonetarypolicyonitsowncando。

IthinkthatsoontheUS,andmaybeotheradministrations,willneedtostartusing,ortocontinuetouse,taxpayers’moneytobailoutthefinancialsector?

JamesFerguson(EconomistandstockbrokerwithPaliInternational):Thebankingsystemisstuffed。

Itdoesn’tmatterwhatofficialinterestratesaredoing,theproblembankshaveisthatthey’reallmassivelyundercapitalised,whichiscodeforsayingtheyarebankrupt。

Butbanksdon’tactuallygobankrupt–theyhavetoberecapitalised。

Thatmeanstheyallneedahugeinjectionofcapital,whichmeansthatallshareholdersofbanks–prettymuchacrosstheboardintheWest–willbedilutedvirtuallytozero。

John:Youmeanthatanyoneholdingbankingstockswillseetheirvaluecollapsetonothing?

James:Ithinkyourdefaultpositionshouldbethatbankswilllose80%ofthevalueoftheirequity(fromthetop)。

Itwillgetdilutedoutbythecapitalinjections,whichare,Ithink,inevitable。

John:That’saprettynastyprospect?

MikeHollings(Chiefinvestmentofficer,Ansbacher):Theproblemisthatthereisjusttoomuchleveragebuiltupinthesystem。

Tounwindthatleveragewillbealongandpainfulprocess。

Intheory,youcouldallowacatharticcleansing,butifwestartlettingbanksgobustthewholesystemwilljustimplode。

Sowhatthecentralbankistryingtodoiskeepconfidencegoingsothatpeoplearen’tawareofjusthowbaditreallyis。

It’sgivingitselftime,hopefully–andsomehowmagically–tosorttheproblemout?

Tim:Ithinkwhatwe’reprobablyall(Iassume)agreeingisthatonewayoranotherthereisgoingtobeanettransferfromtaxpayerstoshareholders?

James:Well,no,inmyscenario,firstwepretendthatnooneislosingmoney。

Thenwehavetodealwiththefactthatweknowtheyactuallyhavelostmoney,andthatinvolvesacapitalinjection。

InJapan(andtheyhadtenyearstothinkaboutit,andsoitwasquiteagoodplanintheend)thegovernmentsaidtoallthebanks:“Right,hereyougo。

Youissuepreferenceshares,webuythem。

Wepromisenottoexerciseourconvertiblerightsforfiveyears,you’vegotfiveyearstogetyourselvesbackonyourfeet。

”?

Butthatdidahugeamountofdamagetotheequityvalueofthebanksbecauseitwasacknowledgingthattheywerealleffectivelydilutedtoalmostzero,andyouneverknewiftheyweregoingtoworktheirwayback。

TheJapanesebankingsectorfell92%frompeak-to-trough。

Evennow,Japanesebanksarehardlyworthmuchmorethanattheverybottom。

SoIdon’tthinkequityholdersofbanksgetoutofherealive。

Mike:You’reright,Ithinktheequityvalueofthebankswillgetseverelydiluted。

Buttheotherthingiswritingoffthedebts。

Somehowyou’vegottotakethehitsandwritethemoff。

Sure,youcaninflateyourwayoutofit[bycuttinginterestrates],butthereneedstobesomepainfeltsomewhere?

Tim:Doyouthinkthat’swhysomeoftheauthoritiesareconcernedaboutinflation?

Mike:Inthepast,ifyouseeratesbeingcutandyouseetheFedhasabandonedthedollarandyouthinkinflationisaproblem,thenyouwanthardassets–whetherthat’sgold,orsofts,oroil。

Ithinkthat’sfuellingthesecondbubble,whichwilleventuallyariseincommodities。

EverydayI’mhearingaboutanewagriculturalfundbeingsetup。

James:Iamprobablygoingtodisagreewithallofyouoninflation。

Ithinkin12months’timewe’llhavedeflation。

LasttimeAmericanproducerpriceinflation(PPI)wasover7%wasinNovember1990;12monthslateritwasnegative。

IntheWest,mostinputcostsarelabour。

Labourcostsarediving–unitlabourcostsinrealtermsaresomethinglikenegative3%intheUS。

So80%ofyourcostsaregoingdownandonlyyourrawmaterialscostisgoingup。

Sofirmscanaffordnottopassoncostsfromthecommodityspace。

Secondly,canyouimagineanydiscretionaryproductwhereyoucouldmakeapricehikestickinAmericainthenext12months?

You’vegotpeoplewhocan’tpaytheirmortgages,can’tpaytheirutilitybills–peopleareraidingtheirsavingssimplytomaintaintheirqualityoflife。

Tim:Ifyou’reexpectingdeflationtobethebiggerissue,doesthatmeanthatyoucanseeanyvaluein,say,giltsyieldinglessthan4。

5%?

James:Yes。

Ithinkbondsaregoingtosurprisemostpeopleontheupside。

Tim:ButthisallsoundsliketheJapaneseexperience。

PeopleweresayingthatJapanesegovernmentbondyieldsinthe1990swerethebiggestshortofalltime,whentheywereyieldinglessthan3%,yetwheredidtheybottom?

0。

5%?

John:IsthatwhatwillhappentotheWest?

Willwestillbewaitingforstock-marketstoturnaroundin20years’time?

Mike:It’sinteresting。

Ifindithugelyironicthatthecountrythathasexportedthiscontagionofcredithasoneofthebest-performingmajorstockmarkets。

LasttimeIlooked,theSPwasdownabout12%yeartodate,theDowwasdownabout9%。

Europeisdown20%,HongKongisdown24%,Japanisdown21%–everybodyelsegetsit,butthepeoplewhostartedthewholeproblemapparentlydon’t。

WerunfundsinGCCcountries[GulfCooperationCouncilmembers,includingSaudiArabia,KuwaitandQatar],whichusedtobetotallyuncorrelated。

Butinthelasttwomonths,theyhavebecomemuchmorecorrelated–eventheGCChascaughtthecontagion。

Tim:Thereisstillprobablybenefitinthesupportofapetro-economy,ratherthananon-petroeconomy?

Mike:ThemarketinQatarisprobablyup10%intheyear-to-date,asopposedtobeingup20%–it’snotadisaster。

Butthepointisthatwhenyougetthesharpdown-ticksontheSP,thenextdaytheGCCtendstofollowlower。

John:Soweareallagreedthateverythingisterrible。

James:Idon’tthinkeverythingis。

WhenthishappenedinJapan,ithappenedtoanequitymarketthatwasincrediblyexpensive。

IntheWestequitiesarenowverycheap。

Thetroubleisthatwe’reinthefirstphasehere。

Marketsarediscoveringnastystuffeverywheretheyturn,andsellingwhat’sliquidaheadofwhattheyshouldbeselling。

Intheendwewillgetapropershakeout,andthestuffthatisreallytoxicwillkeepgoingdownanddownanddown,andalotofstuffwillhavebigrebounds?

Tim:Butpresumablyyouwouldn’tbebuyinganybanks!

AnaCukic-Munro(Co-head,Multi-AssetGroup,InsightInvestment):TheUSisclearlyinrecession。

AndthathastoaffecttheUK。

ButIthinkit’sstillpossibletoprofitinthisrecessionaryenvironment?

Mike:Iagree–ofcoursethereismoneytobemade。

Imeanwehavebeenalmostprayingforthis。

Keepinginterestratestoolowfortoolongequalsmispricedriskacrosstheboard。

Now,finally,youaregettingvaluecomingbackinthemarket?

Ana:Inequities,ifyoumoveawayfromcyclicalexposureyoucanstillfindvalueincompaniesthatbenefitfromwaterinfrastructure,environment,andagriculture,playsonalong-termtheme。

Mike:OneoftheinfrastructureplaysthatwelikealotisGeneralElectric(US:GE)becauseit’samajorbeneficiaryfromaweakerdollar。

It’sgotthewholesuite:desalination,railroads,infrastructure…?

James:Ithinkthisisstillgoingtobeayearmainlyforbonds–I’vesaidforalongtimeshort-datedgovernmentbonds,becauseI’mnotknowledgeableenoughonbondstoknowwheretofindthebestdeals。

Butthereisalreadysometantalisingvaluetobefoundinequities。

Mostequitieswerenotover-boughtbeforetheystarted,they’renowlooking20%cheaperandinmostcasesarediscountingdepression-typeearnings?

John:Anysuggestions?

James:ThenamesIreallylikeareLegalGeneral(LGEN)ontheinsuranceside,becauseIthinkit’snotgoingtobecompelledtorealiseitslossesinthesamewayitsrivalsare,andyou’vegotanice,boringsortofstockthere。

Ialsothinkthemediasectorlooksinteresting。

JohnstonPress(JPR)istradingat3。

5timesearnings–it’spricedasifthefirmwon’tbeherein12months’time,asifit’llbewipedoutbytheinternet。

Butifyoulookattheshares,theyhavecomeoff75%fromthehigh。

There’sanelementofcatchingafallingknife,butthere’sgottobevaluethere。

Ialsoliketheoilfirms,althoughI’mnotahugeoilbull。

Ithinkthecommoditystorymaywellbegettingclosetothepeak。

Industrialmetalsmayhavealreadypeaked。

Mike:Soyouwanttoavoidtheminers?

James:Yes。

Ithinktheminersaretoast!

John:Iknowwe’vegotadivergenceofopinionsaroundthetablehere。

Tim,howdoyoufeelaboutthat?

Tim:Icanabsolutelyagreethat,atleastintheneartomediumterm,thewholecommoditysectoristoppedout。

WhereIstrugglewiththedoom-mongersisthatIcan’tpersonallyfindasectorthathasamoreattractive,very-long-termstory。

TimBondfromBarclaysrecentlysaidthat,accordingtotheInternationalEnergyAgency,theglobalenergysectoraloneneedsareal$22trnoverthenexttwodecadestomeettheanticipatedriseinprimaryenergydemand。

Ifthatfigureisevenremotelyclosetothe“genuine”figure,thenthatisthemostextraordinaryinvestmentthemeforthenextfivetotenyears。

SoIwouldn’thaveanyproblembuyingintostocksthatarebasicallyenergysectorsuppliersorservicebusinesses。

TherearetwoI’dmention。

OneisBucyrus(US:BUCY),whichisasuppliertotheminingsector。

Itmakeslargeexcavationmachineryforsurfacemining。

TheotherisasmallcapintheUK,Lamprell(LAM),whichprovidesconstructionservicesforoilandgasrigs?

Ana:Ithinkingeneral,commoditymarketshavebeenoverbought。

Buttherearestillopportunities。

Everyonehasbeentalkingaboutcornpricesincreasing。

Butnobodylooksatlivestock。

Highcornpricestranslateintohighermeatprices–ariseincornpricesisfollowedbyrisinglivestockpriceswithathree-to-sixmonthlag。

Also,platinumisinteresting:80%isproducedinSouthAfrica,whichissufferingfrompowersupplyproblemsthattheycan’tresolveuntil2013。

Platinumisusedasanauto-catalystforcars–overonemillionnewordersareexpectedtocomefromChineseconsumers,whereGeneralMotorsisinvestingover$5bn。

YoucanbuyintolivestockviatheLivestockExchange-TradedCommodity(AIGL),andplatinumisalsotrackedbyanETC(PHPT)。

James:IfwearemakingrecommendationstoMoneyWeekreaders,thenthefirstthingforthemtodoistoshoreuptheirbalancesheets。

Thethingthat’smostlikelytohappentomostpeopleistheirmortgageratesgoingthroughtheroof。

Let’sfaceit,HBOSborrowedmoneyat9。

5%lastweek,sowhataretheygoingtolendatiftheyborrowat9。

5?

John:Soyourtopinvestmentatthemomentisyourmortgage?

James:Tobehonest,thetopinvestmenteverisyourmortgage。

Itjustseemssoboring?

John:Whataboutgold,nowit’sgoneover$1,000anounce?

Tim:Ithinkgoldwillprobablypullback–Idon’tknowtowhatextent–butIstillwouldn’twanttobeshortofgold。

James:Iwouldn’tbuygoldnow。

You’vegottothinkaboutwhatdrivesgold。

Imean,sure,it’sadollarhedge,butthensoiseveryothercurrency。

Thethingaboutgoldthat’salwaysstruckmeisthatitdoesn’tproduceayield。

Sogoldisbasicallyabuywhenyieldishardtocomeby。

Ithinkthecreditcrunchisgoingtomakebigyieldsveryeasytocomeby。

Youarestartingtolookat10%yieldsbeingavailable,whenlastyear5%wasamazing。

Goldbugswillsuddenlybesaying,“whyamIbuyingthisquiteexpensivethingthatyieldsnothingwhenIcouldbemakingmymoneywork?



Mike:Unlessyoucan’ttrustthelittlebitofpaper。

Tim:Thisiswhatitcomesdownto。

It’sportfolioinsurance。

I’mperfectlyhappyhaving,say,10%exposurewithinaportfolioonthebasisthatifthegoldpricefalls,thatshouldbeconsistentwithariseinthepriceoffinancialassetsandviceversa。

Thatistheattractionofgold。

TheMoneyWeekRoundtabletips

Stock,Ticker,Price

GeneralElectric,US:GE,$37。

27LegalGeneral,LGEN,130p?

JohnstonPress,JPR,129。

5pBucyrus,US:BUCY,$108。

38?

Lamprell,LAM,375p?

LivestockETC,AIGL,$5。

43?

PlatinumETC,PHPT,$197。

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