Lawrence ScottFinancial Services at Sun |
|
Wednesday Mar 19, 2008
The Witch is Not Dead Yet Jamie Dimon at JPMorgan is now a fitting successor to J Pierpont Morgan, or so says the NY Times on Wednesday, March 18. He's now known as James Dimon, a perhaps more fittingly formal moniker to a true "financial statesman" as he was described. But I digress. Attended a Financial Times sponsored event on the financial markets today. Wow. George Pataki and Jerry Corrigan in the same morning. For those of you waking up on the other side of the world (figuratively or literally), that's the former governor of New York and the former chairman of the New York Federal Reserve Bank. Yup, some seriously big hitters. So sit a spell and take a load off. I'll be brief. It's not pretty. I could wax poetic about interest rate policy (failures), credit analysis (blunders), or a financial institution (collapse). Instead, I'll spend two paragraphs (count 'em) on what happened next. The morning started with the CEO of an esteemed French bank advocating that the US banking system assign all of its dubious assets to a new asset class, reclass them on the balance sheet, and with full Fed backing, finance them with new debt. Hmmm. I smell bailout like my hero Paul Krugman. Chief economists from two very high end financial institutions then opined about pro-cyclical (or not) fiscal policy (aka interest rate) adjustments. And an esteemed West Coast academic institution weighed in. For those of you unfamiliar with macro or even microeconomic policy, I can only say I was glad I was paying partial attention during undergraduate classes. And then the fun started. Punctuated by some poor guys pushing a climate change (and trading) agenda. Never saw two guys pushed off stage faster... The esteemed former chairman of the New York Fed gave us a quick primer on what happens when the stuff hits the fan. But much more importantly, he indicated that he was offering his services to help solve this credit crisis contagion. And no one should kid themselves - this is now a full blown contagion. It has hit the fan, the wall, gone out the window, spattered innocent women and children, and now threatens the livelihood of far too many innocents. What struck me was that despite the Fed's 75 b.p. cut and the attendant and variously exuberant effect on financial names, we still have a very serious problem. Good news though - adults are stepping up to sort the problem. Adults with 40 years (or more) of experience. And that's a really good thing. I have only two words for the professionals: thank you. (And why did you wait so *&%$@# long?) Okay, off that soap box. Heard some great examples of Web 2 in action in the FS market. First, how about using Facebook as your distribution channel for investment research? Is that Gen Y (or Z) or what? Second, why not move from the airport currency exchange kiosks to retail FX trading? I pushed a VC on meaty examples of transactional Web 2.0 and this was one popularized in Asia. Lastly, how about social lending in the peer to peer model? Sites like zoppa.com are growing like crazy. Finally, and here's a real stretch: Islamic finance as a play on the democratization of capitalism? Yes friends, you heard it here. PE groups being approached by Islamic finance units to promote a more equitable distribution of risk and reward. Traditional capitalism take note. Web 2.0 teams with your social networks and democratization of the Internet, take note too. You most certainly have kindred spirits in perhaps a corner of the world I have NEVER thought of. Oh yeah, and the title. It was catchy, but perhaps not terribly relevant. Figured I was too obtuse with some of the others. Gotta figure out how to get more Google hits via their web crawlers...
Posted at 10:50AM Mar 19, 2008 by lscott97 in Sun | Comments[0]
Monday Mar 17, 2008
The Sound of One Hand Clapping The notion of an Irish wake on St Patrick's Day seems a bit morbid but fitting nonetheless for the venerable institution known as Bear Stearns. Its fall from financial grace was swift and sure. Financial markets today are unsure what to make of the once proud and powerful firm's untimely collapse. Thursday night's news that the Fed and JPMorgan were stepping in to prop up Bear was a clear harbinger that the end was near. The Bear Stearns that I knew in the 90s was aggressive and smart. It had some of the most sophisticated technology on Wall Street to measure and manage their exposure to the mortgage market. Their block desk was one of the best in the business. Their support for the emerging ECN segment made them stand out. But somewhere along the way, their appetite for risk got ahead of their capacity to manage it. And in the end, what many of us feared finally came to pass: the credit crisis brought down a Tier 1 player. The capital markets have been tested by many crises. What has consistently impressed me over a 20 year career is how resilient the market is. We are now testing new lows, personally and professionally, emotionally and financially. Many will survive and perhaps even thrive in their new home at 270 Park Avenue. That said, the swashbuckler culture that, at times, characterized Bear Stearns is no doubt gone for quite a while. I hate to say it but perhaps the market for almost any form of risk is illiquid. If so, then it's a true Greek tragedy because firms like Bear helped create new markets by methodically and brilliantly chopping up cash flows, assigning them different risk profiles, and then packaging and selling them. Firms like Sun aided that process by providing powerful workstations for quantitative calculations and then later, when "the network (became) the computer," delivering even more powerful capability via server technology. That said though, this post is about Bear. No doubt it's a very quiet day at 383 Madison Avenue. To colleagues and friends, my sympathies on the end of an era. To JPMorgan, please be diligent stewards of a valuable, albeit broken, asset. To the markets, use this opportunity to reprice risk not mis-price it (again). And now a moment of silence as we listen to the sound of one hand clapping.
Posted at 05:53PM Mar 17, 2008 by lscott97 in Sun | Comments[0]
Thursday Mar 13, 2008
Natives and Immigrants at the Digital Border I had a chance recently to hear the CTO of a large institution for higher education talk about his customers (also known as college students). It was an enlightening conversation. Personally, I am at the tail end of the boomer generation and because I work at a technology company, I like to get independent validation of how consumer behavior is shaped by next generation technologies. One of the first slides depicted the difference between "digital natives" and "digital immigrants". Simply put, "digital natives" have grown up with the tools that today make technology nearly ubiquitous, always on, and personally accessible. And the "immigrants" are those from another galaxy. So in a tribute to Jeff Foxworthy, if you print your email or call someone to ask if they got your email, you must be an immigrant! Why is this relevant? I framed a presentation I made recently in the context of social networking as a fundamental behavior change (notice I did not say technology) that "immigrants" who run today's financial institutions must confront. More fascinating to me by this higher education CTO: the difference between outgoing seniors and incoming freshmen was distinct and discernible. Translation: the velocity of change in consumer behavior is accelerating. And so the Web 2 consumer segment is evolving and morphing. A new banking customer two years ago will have a different set of needs than the one who graduates this Spring. So what are the implications for my business and my customers' business? They are probably captured best in a summary of a conversation I had with a senior guy at a Web 2 early stage start up on a recent flight from San Francisco to Boston.
- One third of his target market turns over every 90 days Bottom line: it is a wholly new world. Immigrants like me will struggle to keep pace with natives like Brian above. Financial institutions would do well to respect the lessons here. And many thanks to natives like Brian - I hope you'll let me keep my passport!
Posted at 03:24PM Mar 13, 2008 by lscott97 in Sun | Comments[1] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||