The Big Short on my life and those of others

The patterns I see

When it comes to financial matters, I have always said my father is a brilliant accountant, but it did not come down through the genes. Successful as he was in his profession which he still practices on behalf of the Anglican diocese in which he resides, only one of my siblings took a career path that had any financial component.

However, I somehow have an affinity for noticing patterns, things that align and things that seem to be out of place, unfortunately, I have never exploited that knowledge to the full as over time I have watched things that were once an inkling become an industry where if I had been more driven by my deepest premonitions, I would have been one of the pioneers. No regrets.

In March 2000, I travelled to Munich for an interview with the now defunct Compaq Inc., I decided to spend a week there and during my visit I met with a futures trader who was heavily leveraged in dot.com stocks. My reading of the situation then was things were about to collapse, simply because I noticed a pattern.

My advice to him was to reduce his exposure, he looked at me with incredulity, within weeks the dot.com bubble burst and the rest is history.

As it touched me

I have a more personal story about how I was affected by the markets, just less than a decade later. I bought my apartment in Amsterdam 2001, having given my estate agent 6 weeks to complete the deal to pick up my keys on the 1^st of November 2001.

It was a 105m², 7th-floor apartment with large windows overlooking two old Amsterdam harbours, a wonderful place by any standards. My mortgage was at inception the same as paid for rent in another part of Amsterdam for about 18 months.

The trajectory as it then was, whilst the housing market seemed overheated, the interest rates were going down, and this happened progressively every two years until about 45% was shaved off my mortgage in 6 years.

That other marker

Meanwhile, there was an underlying current that should have sent alarm bells ringing that I ignored until it was too late. My mortgage was undergirded by a life insurance policy that I paid a hefty sum to every year and in the mortgage term of 25 years, it was supposed to have accumulated enough to pay off my mortgage.

Each year, accounting for administration costs and much else, nothing was being compounded into the policy, rather, I was seeing less of what I put in that I had to ask for a review of the conditions of my mortgage to ensure I had not been defrauded.

Everyone who had worked on my mortgage had already walked away with their commissions as the signs of a financial crisis appeared on the horizon with the sub-prime mortgage defaults in the United States.

The tsunami I could not outrun

I could not ignore what was happening, yet I felt like there was an earthquake somewhere far away and the water was receding from the beach in anticipation of a tsunami I could not escape, it was scary.

As so I wrote in August 2007:

Blog - Dishonest lending clue to market tremors

Then casually in October 2007:

Blog - Local situations in global straits

The tsunami had already come in and swept me away from my apparent comfort zone, a revision of my biennial fixed term mortgage saw a rise of 50 basis points, some consequent outgoings of about €550 a month in addition to what I was already paying.

No particular fault of ours, only the banks shoring up their books having messed up and gotten bailed out, with none of the people in charge of this debacle going to jail for anything, if any even got to be questioned for their atrocity.

Swept away

By then, it had become a case of Fixing Capitalist Errors with Socialist Favours which I wrote in December 2007.

Within two years of that, I was diagnosed with cancer, got treated, recovered, but the markets had dealt a blow to our livelihoods, the job markets also began to introduce unfavourable filters to eliminate foreigners from consideration where we once freely had access.

In the end, I sold my apartment at a loss after 10 and a half wonderful years, though barely covered by the insurance and eventually returned home to the UK to rebuild my life.

The Big Short

Earlier today, I went to watch The Big Short which is described as a biographical comedy-drama, and whilst I will agree it is biographical and it is a drama, it was no comedy when we look at the disaster it caused in millions of lives whilst those who found out what was wrong with the system walked away laughing to the bank.

At worst, the banks have been fined billions by the regulatory bodies, but there have been no major indictments, the legislative framework that was to help avoid a similar collapse of the banking system has been watered down and the banks have more or less returned to their brand of casino banking with new banksters slinging guns of dubious provenance as products of the highest quality.

We’re back on that merry-go-round of atrocity for which the generality of the populace has been made to pay dearly for in austerity and worse, whilst the politicians and the banks waltz away in illicit copulation.

Yet, in understanding this rotten and corrupt enterprise a bit more, history is probably going to repeat itself worse than before and the criminals will once again walk free.

Woe betide them.

Banking on new local realities

The difficult rebirth

Getting my mail out of the post box the other day there was a letter from a once familiar organisation with I had not communicated for about 4 years, because then they sent me a letter that they were being absorbed by another bank.

This one had a new logo but more or less the same name it had from when it was an autonomous entity – the credit crunch is doing things radical to the banking sector, in this case Fortis Bank which is now essentially a public utility rather than a bank since it needs government support has had to regurgitate the ingestions it took in over the last few years.

All these onetime seemingly well run banks that were acquisitive with reckless abandon using management models that made the acquired banks look like they were being run by charlatans now all seem to be run by charlatans – it is appalling to say the least.

Show me the building

So, my mortgage bank that was once in the belly of Fortis is now back as an autonomous entity alas I do not get a bailout that closes my mortgage book and lets me consider other things to do with my money.

Though we are all keen on the flexibility and convenience of online banking, I like to know that my money can still be found in some building built of bricks and mortar able to weather storms and having some human being with whom I can converse if I have issues.

I do however commiserate with those who had to queue up for miles round the streets for hours to get into their bricks-and-mortar bank when things seemed to be going belly up – a man cannot be persuaded of a greater cause to run to than to know that there is a run on the bank that he banks in.

Fought for by four

Walking down through the local shopping centre where I live we have 4 automated cash machines representing four banks, one of those banks – PostBank – has now formally absorbed in the bigger ING Group conglomerate but the cash tills have been retained – letters declared that too, sometime ago.

So we have PostBank, ABN Amro, ING Bank and at the far end of the shopping centre, RaboBank, all with walk-in offices apart from PostBank which is now part of the ING Group.

ABN Amro, the subject of the worst banking constipation and expectoration including the discomfort of food poisoning that could hit any bank, the nemesis of the Royal Bank of Scotland in the United Kingdom and Fortis in the BeNeLux had always had the longest opening hours including Saturdays.

Imagine my surprise when I found that my local ING Bank had refurbished its offices, extended its opening hours for the shopping evenings and also will open on a Saturday.

Crunch is global, service is local

Amidst the global consequences of bad banking decisions made by professionals who had forgotten the fundamentals of client service and risk, I would presume the seedlings of competition on the high street have been sown once again between banks.

Less of the adventurism that left many shipwrecked in waters far from home and back to the trusty, thrifty, parsimonious simple local customer who needs basic services, wants easy answers to nagging questions and likes to see the manager rather than being fobbed off by some personal assistant that has created the mystique of financial deity around the boss that their hubris resulted the chaos we now grapple with.

Methinks one should call in on Saturday for a hair cut even though I have none to lose – there should not be much between banks and the barbers, we have all been given severe hair cuts already – now, if I decided to move my account from some far-flung place to my local bank, there might just be a beer mat and pen in the bargain – such extravagance for pennies with the potential of pounds.

On reflection, I think Not!

Local situations in global straits

Global rates

The effects of globalisation have come to my little corner of the world. 6 years ago when I bought my place, I accepted the going fixed rate of interest on my mortgage because I felt rates would go down for the foreseeable future and they did for at least 5 years.

This November is the time for a rate reset and suddenly I wish I knew back then in 2005 that there was a possibility for a rate hike that would see one shelling out a lot more than one ever has done before – that is the credit crunch and rotten sub-prime loans in America filching my disposables. Arghhh!

Local arts

At the same time, I have attended the meeting of our house-owners association which in itself is a bureaucracy that churns out rules that makes one think it is a hostel block.

Beyond that, the entrance atrium had the Y-semaphore indicating the name of our block, but some of the residents felt it did not match up to their aspirational goals of having escaped a working-class label.

So the uppity ones banded together into an arts committee to remodel the atrium which has ended up with a dark green marble wall and plants that cannot stand the atmosphere, any wonder? – it could as well be the well-appointed entrance to a funeral home – how depressing.

Global talk

In the early times, all notices were sent out in Dutch, after a few years, we had them in English too, but imagine my surprise when the notice that ended in my mailbox also had a Japanese translation.

Translation is an inappropriate word because the English version leaves out information found in the Dutch version which states that someone on the fourteenth floor had been pouring deep-frying fat down the drains which were are all clogged up again, just over a month ago. Again? Miscreants!

All versions advise us that it is forbidden to throw fat down the drain as the native version states that translations are offered in English and Japanese to which many a nationalist might remonstrate that we all have to learn Dutch if we live in the Netherlands.

Strangely, the English version goes on the offer the tip to pour warm (not hot!) fat – in their words – in a milk carton and throw that in our communal refuse bin, nothing that the Dutch or Japanese would find useful it seems.

Local meets

A Japanese colleague at work did laugh when he read out the Japanese bit, though I thought there were a good too many pictures (kanji) for little information, I must commend the writer for bringing the Far East to the West.

I do wonder if English would now be allowed at the annual general meeting because the I last attended, my Dutch comments were applauded for their comical value than the seriousness of what I had to say – I have not be that participatory in apartment block politics just for the fact that they end up like Dutch meetings – the desire to congregate and be heard but never reach workable decisions as one stands out antagonising everything regardless of substance.