Friday 16 January 2009

Miracle Landings..Financial Praying for a Miracle

It’s almost the weekend, and there’s way too much bad news out there to fit into my wrap today, so a more general opening today, but bare with me on this one guys…..
*I remember reading an excellent article in the Economist a few years back where they satirised the opening safety announcements + “what-to-do-in-an-emergency-landing” cards provided on airlines ahead of take-off. Particularly enlightening was the fact that never in aviation history had a plane successfully landed on water without disintegrating into a thousand pieces and dooming its passengers to a similar fate – a fact that rendered obsolete the many diagrams of life-rafts inflating and life-vested passengers safely jumping off the wings into the rafts – I never felt comforted again by the safety announcements (nor saw the need for life-vests!?) after reading that article and was slightly angered that authorities somewhere had decided to mislead passengers to believe that everything would be OK if indeed a water-landing-emergency occurred when a successful landing had never before been achieved! Alas, the Economist was yesterday ridiculed by a humble 40-yr veteran US-Airways pilot in NY as he made what must be the first ever successful (and apparently remarkably smooth!) water-landing after losing both engines shortly after take-off – and every single passenger survived! And guess what, the inflatable rafts did pop-out! I didn’t see any life-vests though.
*What does this have to do with anything financially related you might ask? – well, my point is that if one successful incident can override every dismal failure before it and prove authorities right for putting into place contingency plans to deal with a disaster despite being baseless (and making certain people feel a little safer again) then there is hope that the current disaster relief plans being executed by the US (and global governments) in answer to the global financial crisis, may just work and save the day – even if they haven’t worked before.
*On the financials, the once so revered now reveal themselves to be nothing more than ego-driven figures…a busy few days for once mighty global financials sees their leaders squabble like children and throw a hissy-fit (Bank of America) because the other kid (Merrill Lynch) lied when they agreed to be BFFs (Best Friends For Ever for those of us born before 1995) and other children come running back for another cookie (Citi) from the warmth of the full-laden pantry (US Govt) – once you’ve acquired a taste for something so sweet (such as having $300bn of bad-assets ring-fenced) it seems the sweet-tooth takes over. Citi will be revealing its earnings later today, with a certain calm-before-the-storm enveloping the organisation in the last 48hrs – if only our share price would enter the same state of Zen calmness. Losses expected somewhere between $6bn-10bn. JP Morgan yesterday of course showed better than consensus EPS but still suffered huge trading losses or Q4 ’08. The Bank of American bail-out ($20bn injection + $1180bn ring-fencing) may provide a clue to weekend conversations on Citi’s fate.
*Another way may be to bite the bullet as the Irish government has bitten - nationalising the “too-important-to-fail” Anglo-Irish Bank. Personally, I’m impressed the Irish have gone and done what everyone realistically thinks will happen in the end anyway – is it worth attempting to protect a seemingly lost-cause rather than admitting defeat, simply taking full govt. ownership and beginning the cleaning-up process in earnest? The sooner you start, the sooner you will finish.