2018: The review, Part 1

17 . 12 . 18

By Ignatius Wilson

This year has been, by many accounts, disastrous. A year of Trump, bear markets, trade wars and irrefutable and major misconduct by our banks and financial services providers. But every cloud has a silver lining and one positive is that this year has been full of interesting news (that doesn’t cut it does it?). The positives for investing is a turbulent investment landscape offering a lot of opportunities on stocks that have taken a beating.

Here let’s take a review of four aspects of the year that we have covered in the blog: the Royal Commission; the share market; macroeconomics both contemporaneously (in America and Turkey) and historically (in Zimbabwe); and how old-fashioned institutions are being forced to adopt new technologies and enter new sectors to ensure they continue to make record-breaking profits!

I wrote about Blockchain being supported by one of the world’s largest fund managers, Fidelity, recently. This is a developing story in many ways because although we knew the CEO of Fidelity is a cryptocurrency enthusiast, it has taken many months for the structure to take shape around how, exactly, a huge financial institution would engage with the Wild West of new technologies.

It is the Wild West because it can be dangerous, it is effectively lawless (unregulated) yet it offers great opportunities. Fidelity plan on being the oil baron, sheriff and preacher, making fortunes, enforcing regulation and converting new believers in this basically uncharted territory.

Traditional merchant banks like Goldman Sachs and Macquarie Group have entered the retail market in a big way, offering credit cards, competitive interest rates and huge volumes of advertising to tempt customers away from their current lenders.

They are being forced into this high volume, low margin sector by the simple fact they have dominated the business and institutional banking world for decades and are looking to accelerate their profit-taking.

Ironically, this comes at a time when those margins are going to be further squeezed by increased fines, high costs of regulation and the risks of legal action being taken by disenfranchised customers.

This leads us to the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The fact this took place is even impressive, having been fought against tooth and nail by successive prime ministers Scott Morrison and Malcolm Turnbull, who, as pressure mounted from political opponents, bank customers and industry bodies, even penultimately vouched for the banks to run their own fact finding mission so as to avoid an independent review!

Countless examples of immoral and illegal activity were uncovered by players ranging from  individual financial advisors, retail branch salespeople, board members to executives. The scope of the commission was too large and its timeline too brief to get to the bottom of the misconduct but it has reminded us all why financial literacy is so important.

If that sounds like victim blaming, it is no wonder all of the big banks have pumped tens of millions of dollars into financial literacy programs over the last few years. Up until now, financial services providers could run these community-based programs helping people, on face value, yet treat their customers with utter contempt.

Perhaps now the mood has shifted. However I feel that the public have found their scapegoats, any extant CEOs or practitioners have successfully dodged a bullet, and customers will not be much better off.

Next week I will run through the next part of the annual review and we will have a look at the performance of the sharemarket this year.

most recent

Bills, notes and bonds.

Bills, notes and bonds play an important role for investors and in the financing government and business.

2018: The review, Part 1

17 . 12 . 18

By Ignatius Wilson

This year has been, by many accounts, disastrous. A year of Trump, bear markets, trade wars and irrefutable and major misconduct by our banks and financial services providers. But every cloud has a silver lining and one positive is that this year has been full of interesting news (that doesn’t cut it does it?). The positives for investing is a turbulent investment landscape offering a lot of opportunities on stocks that have taken a beating.

Here let’s take a review of four aspects of the year that we have covered in the blog: the Royal Commission; the share market; macroeconomics both contemporaneously (in America and Turkey) and historically (in Zimbabwe); and how old-fashioned institutions are being forced to adopt new technologies and enter new sectors to ensure they continue to make record-breaking profits!

I wrote about Blockchain being supported by one of the world’s largest fund managers, Fidelity, recently. This is a developing story in many ways because although we knew the CEO of Fidelity is a cryptocurrency enthusiast, it has taken many months for the structure to take shape around how, exactly, a huge financial institution would engage with the Wild West of new technologies.

It is the Wild West because it can be dangerous, it is effectively lawless (unregulated) yet it offers great opportunities. Fidelity plan on being the oil baron, sheriff and preacher, making fortunes, enforcing regulation and converting new believers in this basically uncharted territory.

Traditional merchant banks like Goldman Sachs and Macquarie Group have entered the retail market in a big way, offering credit cards, competitive interest rates and huge volumes of advertising to tempt customers away from their current lenders.

They are being forced into this high volume, low margin sector by the simple fact they have dominated the business and institutional banking world for decades and are looking to accelerate their profit-taking.

Ironically, this comes at a time when those margins are going to be further squeezed by increased fines, high costs of regulation and the risks of legal action being taken by disenfranchised customers.

This leads us to the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The fact this took place is even impressive, having been fought against tooth and nail by successive prime ministers Scott Morrison and Malcolm Turnbull, who, as pressure mounted from political opponents, bank customers and industry bodies, even penultimately vouched for the banks to run their own fact finding mission so as to avoid an independent review!

Countless examples of immoral and illegal activity were uncovered by players ranging from  individual financial advisors, retail branch salespeople, board members to executives. The scope of the commission was too large and its timeline too brief to get to the bottom of the misconduct but it has reminded us all why financial literacy is so important.

If that sounds like victim blaming, it is no wonder all of the big banks have pumped tens of millions of dollars into financial literacy programs over the last few years. Up until now, financial services providers could run these community-based programs helping people, on face value, yet treat their customers with utter contempt.

Perhaps now the mood has shifted. However I feel that the public have found their scapegoats, any extant CEOs or practitioners have successfully dodged a bullet, and customers will not be much better off.

Next week I will run through the next part of the annual review and we will have a look at the performance of the sharemarket this year.

most recent

Bills, notes and bonds.

Bills, notes and bonds play an important role for investors and in the financing government and business.
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