Jan

14

 The 14th Annual Needham Global Growth Conference just concluded at the New York Palace Hotel. The crowd's favorite Keynote act Dr. Arthur Laffer has been followed at the closing luncheon by David Malpass, former adviser to the White House and a number of leading senators. This speaker's most eye-popping pie chart stressed the enormity of Europe's banking sector: 350% the asset size of the US Banks, and three times bigger in proportion to the ECB vs. US banking in proportion to FED. That didn't even include the UK and, I believe, the Swiss! Mr. Malpass's conclusions, while up-beat longer-term in respect to the frame of traditional economic and political cycle - did not seem to offer crystal clear current solutions.

So in the Q&A overtime, I had a couple of questions:

1.
With this week's headlines of big pharma and Europe's automakers reversing their roles vis-a-vis bankers, while certainly eyeing preferential feedback on the other side of the recovery cycle - doesn't it emphasize the glaring incompetence of bankers over-all? Should bankers continue to enjoy their supreme reign within the modern society, or might have the old books been right forbidding most of the banking usery activities?

2. With yesterday's unprecedented German Treasury Auction results, where yields reached new lows on the wrong side of zero - is it plausible to anticipate a new perfect banking crime in the making? I mean: the only reason for T-bill's preposterous valuations is customer suspicion of banks' re-hypothecating their deposits. Likely no smoke without fire, the banks might use customer money to take an unprecedented net Short in the T-bill auction. To those skeptics: "But what would the banks do if the price continued yet higher!", may I remind the legend of the NYSE trader in the midst of the total Cuban Missile crisis panic. "Cover all my Shorts, and reverse them to Long!" But Sir, the rockets are about to fly?! "Thank you for the latest news, my boy! If you're right and I'm wrong - this trade will never clear!! Go on double margin"

Alas, co-founder George A. Needham had to remind the esteemed audience that he'd allowed one last question and not two - and with Mr. Malpass pleading for easier questions next time, the luncheon adjourned to applause! I'll have to catch up to Mr. Malpass elsewhere on conference circuit


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