|
The weekly voice of En Passant bringing you up to date
|
Quote of the Week“Banks are run by people, notably CEOs. CEOs are people like the rest of us (just richer and, often but not always, fatter). They are motivated by two main things: (1) making a lot of money and (2) not looking like an idiot. Maximizing profits for their shareholders is far down the list. Boards of directors are primarily motivated by (2), not looking like an idiot (and getting sued). In good times, when people underestimate risk, this leads to lots of leverage and juiced-up profits. In bad times, both motivations produce behaviour that may be irrationally conservative from the standpoint of the shareholders. A CEO with a $5m base salary who knows this year is going to be terrible and that he won’t get much of a bonus has no incentive to increase profits. He does have an incentive to make sure his bank stays in business - so he keeps getting that base salary - which means being as conservative as possible with cash. He also has no desire to go bankrupt and get hauled in front of a Congressional hearing (motivation #2), which again means being as conservative as possible. We may have to wait for greed to once again take over from fear in the heads of those CEOs. Luckily, it always happens”. From James Kwak, the co founder of the Base Line Scenario Shooting the Messenger?At a conference this week, it was noted that the BBC correspondent Robert Peston had much to answer for in helping generate increased speculation that the market would fall and hence a lack of confidence in the market. "Mumbai Attacks: Security Vs Hospitality?"“Security and hospitality can’t go together; there is a limit to what an individual hotel can do for tightening security”. This is the view of Mr Oberoi, Chairman and Chief executive of The Oberoi Group who last week saw one of his hotels become a target during the horrific attacks in Mumbai.
|
|
The Competitive edge
|
|