10 years ago, I spent a brief stint as a sell side stock analyst for a start-up Investment Bank-Lightyear Capital Inc. I told the President of Canadian Western Bank (CWB), Larry Pollock, that I didn't understand the large Canadian Banks businesses. I explained that their 40 to 60 pages of financial statements do little to reveal the inherent risks they are taking and that you
can't even tell the duration of the bank based on their financial statements.
Canadian banks avoided the mistakes of their American counterparts in the latter part of last decade. However, today Larry Berman on his weekly show on BNN (the very last comments), claimed the Canadian Banks were starting to pursue some of the same poor lending practices as the Americans but got lucky the bubble burst when it did before they got too deep;-had it come two years later; the consequences in Canada would have been similar.
10 years ago, it was Big Six’s bad loans to Argentina that were in the headlines and my coverage initiation (January 4, 2002) of CWB reflected that:
“Edmonton based Canadian Western Bank (CWB:TSE) is quietly becoming an impressive western Canadian based commercial bank. While the larger Canadian banks are experiencing difficulty with their foreign loans, including those in the US and Argentina, CWB’s laser-like focus on western Canadian commercial banking continues to represent an attractive investment
opportunity.”
So as I write this (10:18 AM local Calgary time) Francis, one of the commenters at BNN is saying the problem with the Banking system is that you don’t know what you are investing in - exactly.
These thoughts are mirrored by comments made by Hussman this week:
“When I was a professor at the University of Michigan, I used to tell my MBA students that the best way to avoid seeing the word "debacle" next to their name in the Wall Street Journal was to avoid situations involving a "leveraged mismatch with a lack of transparency." Those features are at the heart of nearly every major financial crisis: a) leverage - taking positions with large amounts of borrowed money, which magnifies the impact of errors; b) mismatch - long and short positions in risky securities that don't closely offset, and; c) lack of transparency - organizational structures or accounting rules that prevent positions from being monitored and marked-to-market. A fourth feature, d) a sudden absence of liquidity - is often the event that triggers a debacle, but the root of the problem is almost always a highly leveraged, mismatched, opaque position that was there in the first place.”
I am happy to see that at least one head was cut off at JP Morgan, but absent regulatory changes it will not be enough.
The following quote is attributed to Albert Einstein:
Insanity: doing the same thing over and over again and expecting different results.
can't even tell the duration of the bank based on their financial statements.
Canadian banks avoided the mistakes of their American counterparts in the latter part of last decade. However, today Larry Berman on his weekly show on BNN (the very last comments), claimed the Canadian Banks were starting to pursue some of the same poor lending practices as the Americans but got lucky the bubble burst when it did before they got too deep;-had it come two years later; the consequences in Canada would have been similar.
10 years ago, it was Big Six’s bad loans to Argentina that were in the headlines and my coverage initiation (January 4, 2002) of CWB reflected that:
“Edmonton based Canadian Western Bank (CWB:TSE) is quietly becoming an impressive western Canadian based commercial bank. While the larger Canadian banks are experiencing difficulty with their foreign loans, including those in the US and Argentina, CWB’s laser-like focus on western Canadian commercial banking continues to represent an attractive investment
opportunity.”
So as I write this (10:18 AM local Calgary time) Francis, one of the commenters at BNN is saying the problem with the Banking system is that you don’t know what you are investing in - exactly.
These thoughts are mirrored by comments made by Hussman this week:
“When I was a professor at the University of Michigan, I used to tell my MBA students that the best way to avoid seeing the word "debacle" next to their name in the Wall Street Journal was to avoid situations involving a "leveraged mismatch with a lack of transparency." Those features are at the heart of nearly every major financial crisis: a) leverage - taking positions with large amounts of borrowed money, which magnifies the impact of errors; b) mismatch - long and short positions in risky securities that don't closely offset, and; c) lack of transparency - organizational structures or accounting rules that prevent positions from being monitored and marked-to-market. A fourth feature, d) a sudden absence of liquidity - is often the event that triggers a debacle, but the root of the problem is almost always a highly leveraged, mismatched, opaque position that was there in the first place.”
I am happy to see that at least one head was cut off at JP Morgan, but absent regulatory changes it will not be enough.
The following quote is attributed to Albert Einstein:
Insanity: doing the same thing over and over again and expecting different results.
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