That Rollercoaster Ride

Where are we on the crazy roller coaster ride? At the bottom, that’s where, and we are so blinded by the volatility that we can’t see the underlying fundamentals clearly.

By Colin Benjamin

Last year this column suggested it was time to settle into your seat, check your safety belt and prepare for an exhilarating experience. I pointed to a lackluster share market that showed every sign of a shift away from equity investments into an already inflated property market. Financial institutions were looking to create new home equity deals to try to maintain the momentum.

Where are we now on the crazy rollercoaster ride? We are now at the bottom of Luna Park’s big dipper characterized with a rise and sunny optimism that begins on a Tuesday and Wednesday, only to fall by Friday with the weekend to prepare for another surge.

The newspapers are selling volatility so there is no point looking to them on a day to day basis to work out where we are in the cycle. And that’s the problem. We are so blinded by the volatility we can’t see clearly the underlying fundamentals.

A year on, what’s changed? We now have gold at $900, oil at $100 and the biggest rush to ‘regulatory legislation” since the 1920s to give the appearance that trust and transparency will be given a little more attention. All the while the truth is allowed to wallow in the greed of those whose bonuses and exit payouts are to be protected at all costs. Take for example the statement by Opes TraderDealer on-line execution subsidiary that

We use securities lending to give our clients legal title to securities prior to them being sold explaining that this allows it to circumvent the legal restrictions governing short selling. (AFR 2/8/8:p72)

Take for another example the fact that Steve Targett, who led the ANZ’s division responsible for corporate and institutional lending is seeking a mere $57 million in damages for missing out on filling John McFarlane’s seat at the top of ANZ.

How about looking at the lavish performance-pay regimes of Wall Street? How about looking at the consistent pressure on non-financial institutions to find ways around the central banks regulatory powers to leverage an ever wider range of complex derivatives; instruments that could not be held to account while the banks made ever larger contributions to housing costs?

But enough of the gloom and doom. In keeping with the Futurist’s silver lining policy, note that in the latest round of trips along the rollercoaster, the banks are starting to understand the value of providing finance to small and medium firms that are actually making profits by doing real work for people who really appreciate direct service.

As the financial world continues to write down the greenback and starts looking seriously at the BRIC economies, the best opportunities are opening for entrepreneurs with strong cultural links in these fast growing economies.

Watch out for a major change in thinking around the globe in the next few months about capital gains taxes and new checks on financial imposters who short sell our futures markets without adding anything that one can put one’s finger on as a source of new value added. We may even see the gnomes start to push for a turnover tax for this sort of value destroying behavior and the repeal of payroll taxes that penalize successful small and growing medium scale enterprises.

Data from the US points out that it is small business and the banks that are lending to them that are doing well. This is where the real value is being added by small and medium business owners who actually do things – not the desk jockeys who have never made anything and continue to contribute to the volatility.

Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton.

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