Long Live the Boom

12th of June, 2017

Do you remember when former President Barack Obama passed landmark banking laws in response to the catastrophic 2008 Global Financial Crash? The GFC decimated investment markets and cruelly destroyed millions of Americans dreams of home ownership and employment. So, Washington responded to ensure that this would never happen again.  Laws were passed to guarantee that America, that the world, would NEVER, EVER again face such a financial calamity,

When Lehman Brothers went bust, it was a close call – it was the day that capitalism and our banking system nearly systemically failed.

However, the developed western world breathed a collective sigh of relief, when finally, our elected representatives had our wayward capitalist system back under control. The legislatures had done their job and legislated the capitalist genie back into the bottle.

But that was then and this is now…..

It is often said that “Time is the best healer of old wounds” and rest assured our financiers have taken this proverb to heart.

You see, on Thursday, Washington again took a vote 233-186, this time to undo much of that “landmark legislation” the Obama administration had passed. Those pesky laws that were to prevent another financial meltdown are now making it tougher for community banks to lend which in turn is impeding the economy: or so we are being told.

“Our community banks are in trouble…they are being crushed by the costly rules imposed on them by the Dodd-Frank Act. These laws may have had good intentions but its consequences have been dire for Main Street.” Speaker Paul Ryan, R-Wis.

“You see, things have changed and this time it’s different” (yes, please read this with your most sarcastic tone) – even the US Federal Reserve has described the U.S. banking system as more resilient, more robust than before the financial crisis……

I mean who would want the Consumer Financial Protection Bureau being able to charge financial institutions hefty fines for “Unfair” or “Deceptive” practices?

And don’t we all want the banks to engage in trading for their own profit using federally-insured deposits?

And thank goodness the proposed rule that investment advisers who collect commissions must put their clients’ interests ahead of their own will be rescinded…..

The American Bankers Association said the bill would “fix financial rules that are holding back the U.S. economy, and doing little to enhance safety and soundness.”

– but hey, what else would a banker say??….

You see this new cycle is well and truly underway, with America forging ahead, leading the way for the rest of the world. If you want to understand where this cycle is heading, just look to the cycle leader – AMERICA.

As the cycle progresses, credit will become more and more available for speculative purposes. Never underestimate the influence of the banking sector nor their influence over their regulators to get exactly what they want. Don’t worry about the smoke and mirrors sideshow that occupies the financial press – know that the Banks keep their eyes fairly, (well maybe not fairly) but certainly squarely fixed on the BIG PRIZE!

Remember the thoughts of doom and gloom when America first introduced this obstructive legislation, hampering the unfettered growth of the banks… “But how can the cycle persist if the banks can no longer operate without constraint?” I heard you say in 2010.

You were thinking that this time it must be different as they have legislated the banks out of the cycle.

If you want to understand where this cycle is heading, just look to the cycle leader – AMERICA.

Yet now in 2017, the US Banks are once again, as history would warn us, freeing themselves of the regulatory shackles put in place to try and prevent another financial calamity. At the same time, they are rapidly increasing available credit that continues to be reflected in the increase of speculative asset prices.

Yet listen to yourselves now as you doubt the Australian banking industries’ ability to expand in response to APRA and our Government’s new banking requirements.

The new cycle is well and truly alive across the developed world, Australia included. Our proprietary tools and historic context tell us exactly what investment action we need to take. This framework shapes our thinking ensuring that we take exactly the correct action at exactly the correct time in the cycle.

I guess on the Queen’s Birthday long weekend its only appropriate to embrace the chant:

“The Bust is dead. Long live the BOOM….”