Mayo softens a bit after 'productive session' with Citi
Maybe the years of bashing banks is taking its toll, but Mike Mayo, CLSA's US banking analyst, seemed relatively subdued at his press briefing yesterday compared with last year. He was relentless in excoriating Citi at CLSA's Investors' Forum last year for what he felt was its poor banking practise and most of all for refusing to see him. But in the intervening period, he seems to have made his peace with the bank. He's had a 'productive session' with Citi chief executive Vikram Pandit and now has 'a better understanding of the company'. But he's not exactly bullish on the bank. 'It had 20 major management mishaps in the past decade,' he says, and rates it an underperform.
He's still very negative on US banks, predicting that 2011 will be the worst year for the sector, in terms of revenue growth, since 1938. Indeed, he says the decade following the financial crisis will be the worst for US banking revenue growth since the 1930s.
He characterises the US banking sector as 'Japan Lite', saying that US banks are two years into a cycle that extended 20 years in Japan after the 1980s crash. 'The US banks have not resolved their problems,' he says, meaning that they have not fully recognised their losses from the financial crisis. The moves so far amount to no more than 'putting lipstick on a pig'. They need to take a machete to downsizing rather than the penknife they have been using so far.
The one thing he is bullish on is his forthcoming book, Exile on Wall Street: One Analyst's Fight to Save the Big Banks from Themselves. It's his first book and his last, he says, because he found it such hard work. It's due out in November.
'My own stories from the battlefield - you will not be bored,' he assures us.
Patterns of history
Every age reinterprets the past to make their own sense of it. The 19th century was awash with the big picture histories of civilisation. This fell away after Karl Marx appeared on the scene, and, with the exception of Arnold Toynbee's A Study of History, historical writing became more narrowly focused. In the last decade or so, there has been a revival in big historical themes by writers such as Jared Diamond who have explained the patterns of history in terms of geography. The theme has been developed by Stanford University historian Ian Morris, who tells us Why the West Rules - For Now, the title of his recent book.
The answer, as Morris explained yesterday at CLSA's Investors' Forum, is all down to geography. This, he argues, determines the level of social development in societies, which for the last 200 years has been higher in the West than the East. This is not a situation that is going to last forever, he says. Things change. Rising social development results in bigger populations, more elaborate lifestyles and greater wealth and military power.
These changes unleash forces, such as famine, disease, migration and state collapse, which undermine social development, especially if they occur at the time of climate change, he argues. Morris has compiled an index of social development showing how long the West has been on top.
The index also projects into the future and suggests that Western dominance will last until around 2100.
However, we feel that given the apparent inability of the Europeans to resolve its problems with Greece and US reluctance to deal with its monstrous deficits, the East's moment with destiny may arrive a good deal earlier than Morris has determined.
Funny how countries get so touchy about flags. Take the case of the mainland farmer who was jailed for three weeks for setting fire to the national flag. Have we lost all sense of reality? Why not charge him with criminal damage, since he was burning public property.
Now the story has travelled worldwide, making Hong Kong look craven. But Hong Kong is not alone in fussing about flags. Attempts to criminalise flag burning in the US have only narrowly been defeated. Malaysian maritime officials detained the crew of an Indonesian vessel for flying the Malaysian flag upside down. Getting tough over flags makes regimes look insecure.
The go-to guys
UBS trader Kweku Adoboli, arrested on suspicion of fraud, has taken the precaution of hiring the lawyers who advised Nick Leeson, whose rogue trading brought down Barings in 1996. In addition to Adoboli, solicitors at Kingsley Napley are also advising other celebrities of interest to the police, such as former News International chief executive Rebekah Brooks for her alleged role in the phone-hacking saga, and Vincent Tchenguiz for his alleged role in the collapse of Icelandic bank Kaupthing.