ANIMAL SPIRITS TAKE ONE

So much silly stuff and so little time to laugh at it all.

We're talking MSM here.

Starting with a story in today's Financial Times, "Without prudence as a value we are all at risk," the author, William R. Rhodes, CEO of  Rhodes Global Advisers and former Citibank executive, opens with:

Financial groups are dialing up risk in their search for yield because of the extraordinary amounts liquidity created by central banks and the prolonged rate environment. This is often not being done prudently. The key cause of past financial crises are being forgotten at many financial institutions.

It should be noted one of the main financial institutions Rhodes apparently leave out is central banks. Rhodes goes on to name such things as something we've mentioned before, subprime auto loans, non-investment grade syndicated loans and corporate emerging market debt.

All soaring and all true. All also occurring in the absence of  very little real growth. He then cites the EU, Japan and the U.S. where "growth over the past 12 months has been less than 2 percent, yet in the same period the S&P 500 stock market index gained about 17 percent."

There is China on the other hand, perhaps the only bright spot if one can digest those statist-controlled economic figures without getting dyspeptic, hitting the government's 7.5% objective, much of it, however, owing to increased credit growth.

End result surfacing bubbles in real estate and an unregulated, increasingly shadowy shadow banking system while mainstream banks continue their lending to government entities.

Rhodes next takes on global money runners in perhaps the funniest sentence in his whole article: "To some degree, they feel the competitive pressures to produce better quarterly results consistently."

We don't know if the well-meaning chap smokes or imbibes much but pressure to produce consistent better quarterly results is hardly new. And boards that don't mind occasionally looking the other direction aren't either. Desperate times don't always lead to quiet desperation. In fact, it can get quite noisy, Janet Yellen pun intended.

Part of Rhodes' solution is he wants central banks to pay more attention to risk behavior. Sounds like more of the usually intrusive, Big Brother approach. Calling for the Fed to use its influence--as if it has any left--to promote "prudence in risk taking as a core cultural value" would get a big laugh in most Comedy Clubs.

This sounds like excellent material for one of those proposed MBA ethics classes once the guffaws quiet down.

Next Rhodes proposes putting the old bureaucratic fox in charge of the financial hen house.

Jointly, leaders of  financial institutions and their regulators in the US, UK, Japan, the eurozone and in China, should emphasise the importance of risk management and risk culture. They should come together to exchange views candidly and explore ways to channel risk activities onto a surer course.

With all due respect, someone needs to ask Rhodes this question: When animals get hungry, what do they want to do? 
t.man hatter