Monday, 6 August 2012

Draghi and friends just want your money

Pssst!  Bill!  Thought an investor is "An individual who commits money to investment products with the expectation of financial return".  May  I underline the "expectation" part, not to be confused with "guarantee".

What we're saying is when hoards of investors stepped onto each others' toes to buy Greek, UK or Spanish debt in the early noughties, when the spreads over the bunds were slim, sleek and sexy, it was because they were not grown ups or because the governments cheated on them?  Or was it because they placed a bet on the EU governments covering for them no matter what?

Your position implies that haircuts are not in the investors' dictionary, they like their capillary pride flutter in all its splendour in the winds of the banking-induced recession?

The low yield (read risk) - low return relation does not mean no risk - some return.  And when the investors are useless to prevent the financial system close down the world economy, they'd better be prepared to incur substantial losses when the financialization of the global economy creates a sovereign debt crisis and spoils the low risk / low return balance.

Your friends better do more to reform the financial system, and ensure there is more of a balanced, sustainable market, and the market rules apply to all players.

Investors cannot be spectators making money all the time.  They have a duty to ensure the rules apply, not to defend deregulation (and free markets) only to accuse the governments when things go wrong.  Investors have a responsibility too, and should assume their part of the deal.

A mature approach and a long term view is the best way to protect their interests, and not to rush to the rating agencies and speculators to cry childishly these crack their whips at Mr Rajoy or Ms Merkel to get their ice-cream pennies back.

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