We live in a curious age. For all our mediums of instant communication, language increasingly obfuscates rather than enlightens. It seems people wish to be told what they want to hear rather than face reality. As for governments, now ever more manned/womaned/theyd by the incompetent, it’s a desire they are happy to comply with, endlessly infantilising their populations, thus rendering them in need of protection from an array of ‘harms’ that previous generations once referred to as ‘life’. As folks are encouraged to take even less responsibility for their actions, it should come as no surprise they become increasingly gullible and unable to sort the wheat from the chaff.
I recently compared app based junk food delivery with nutritious, species-appropriate pet food. The irony being the pet eats better than the owner. However, it’s far from the only irony in the world of TV advertising. Phone-based betting is a rich source of nonsense. On the one hand, it shows punters celebrating wildly after a goal is scored. A current William Hill offering shows a gentleman shouting into the camera “this is epic!”. He’s almost correct but if he’d said “this is epically stupid”, he’d be a lot closer to the mark. On the other hand, obviously the result of regulatory prodding, gambling companies exhort customers to ‘take time to think’ or proffer ‘when the fun stops, stop’. Clearly, they really mean ‘when the fun stops, keep going’ but we are supposed to believe the fantasy that they don’t. They go on to make it sound like they’re doing you a favour with ‘tools for safer gambling’ like deposit limits, timeouts and cooling-off periods. Oddly, they’ve yet to deploy my favourite tool for safer gambling which is not to partake in inveterate gambling in the first place because it’s a mug’s game. Who knows, perhaps it will feature in future campaigns?
Banks, too, are constant purveyors of drivel. You’ve probably seen the current Lloyds advert, replete with black horses rampaging around the Elm Lodge housing estate. Comfortingly, Lloyds tells us it will “always be by your side”. Mmmmm …. coming from an organisation that paid out more than £20bn compo to settle historic PPI claims, customers could be forgiven for preferring it to keep its distance.
George Bernard Shaw noted that all professions were conspiracies against the laity. He meant they deliberately attempted to burnish prestige by, amongst other things, making matters sound more complicated than they actually are. I would like to think I have a reasonable grasp of the English language but increasingly, I read sentences containing an inordinate amount of superfluous words and while understanding them individually, comprehension is somewhat dulled once they form sentences and paragraphs. The following is an excellent example I received, via unsolicited email, from an Independent Financial Adviser.
Our focus is to improve the finances for everyone, through connected innovation, flexible delivery and conscientious independent professionalism. To empower everyone to be financially self-aware with targeted outcomes, sustainable financial advice and long term financial support.
If words could possess an odour, this resembles the smell from the field the farmer keeps his bull in. Would successful innovation likely result from disconnection and inflexible delivery? If one is professional are you not, by definition, conscientious? As for liberal use of fashionable words such as empower, sustainable and support, my only surprise is that diverse, transition, embrace and holistic didn’t also make the cut. Curiously, there’s no mention of competent capital deployment which might include words like return on capital, balance sheets and cash flow.
Marketing soft soap no infests everything. The implosion of Silicon Valley Bank (SVB) came out of the blue but rest assured, U.S. Treasury Secretary, Janet Yellen, had ‘full confidence’ in banking regulators and the U.S. banking system remains ‘resilient’. Yet, if regulators had been up to scratch, a bank as strange as SVB would have been watched like a hawk.
In 2022, SVB held around $190bn in customer deposits (to SVB, these are creditors). Much of this represented the proceeds of business sales by technology entrepreneurs. SVB was likely paying nothing on these balances, making it free funding, The problem was that it couldn’t meaningfully recycle this cash into loans (to SVB, these are assets). So, it bought bonds (both U.S. Treasury and Mortgage Backed Securities {MBS}). It had at least $80bn of the latter offering an average yield of approximately 1.5%. If funding is more or less free, what’s not to like? However, once interest rates started their hurried path back towards normalisation, bond yields rose which meant prices fell. Now, SVB was not only earning a poor return compared to what was currently on offer but the bond portfolio (and especially the MBS component) was under water. As rates went higher, the situation worsened. Once bond losses had to be recognised and depositors started withdrawing, the writing was on the wall
It should be noted that SVB failed due to its unusual depositor base and ludicrous risk management. I mean, with footloose deposits, far too many MBS bonds and interest rates at all time lows, what could possibly go wrong? However, Yellen was Fed Chair between 2014 – 2018, so her fingerprints are all over its rampant money printing. Rates are now being jacked sharply higher to extinguish the inflationary mess she and her central bank ilk are responsible for. I’d therefore take the soothing words she dispenses regarding her confidence in banking regulators with a large pinch of salt.
Unbelievably, SVB’s CEO, Greg Becker, was a director of the San Franciso Fed (one of the 12 regional Fed banks that comprise the Federal Reserve System). Another recent casualty, Signature Bank, which imploded 2 days after SVB, had Barney Frank on its board. He was partly responsible for the 2010 bank regulations resulting from the 2008 financial crisis (Dodd-Frank Act). Join the dots between Yellen, Becker, Frank, Bailey, Lagarde et al. They all say the same things, do the same things and think the same way. Far too few of them have ever held a real private sector job and never question why their theories fail in the real world. They are a combination of salespeople and cheerleaders, always uttering statements designed not to scare the horses. As I write, Credit Suisse has just been rescued by UBS: not a very ‘Swiss’ situation at all and a serious embarrassment for the epicentre of conservative banking.
When Gary Lineker was suspended from Match of the Day, I did wonder if he might get a central bank gig. He’s overpaid, likes the sound of his own voice, brings no solutions and in a former life was a crisp salesman. He’d fit in just fine.
The value of investments and any income from them can go down as well as up and you may not get back the amount originally invested.
This material should not be considered as advice or an investment recommendation. Investors should seek advice from an authorised financial adviser prior to making investment decisions.
John Newsome can be contacted on 01423 705123 or john.newsome@williams-im.com. Williams Investment Management LLP is authorised and regulated by the Financial Conduct Authority.
