This mar­ket is full of op­por­tu­ni­ties

The Jewish Chronicle - - & Finance Business -

I now take a deep breath be­fore pick­ing up the morn­ing’s pa­pers. A trickle turned into a brook, which be­came a stream and has now de­vel­oped into an eco­nomic tsunami — the af­ter­ef­fects of which will be felt for a very long time to come.

Blam­ing bankers is hardly worth the ef­fort. They are paid to cre­ate prod­ucts the fi­nan­cial mar­kets want. Is it the in­sti­tu­tions which in­vest our money who are to blame for this, the banks who cre­ated the prod­ucts, the reg­u­la­tors who failed to mon­i­tor the dis­tri­bu­tion of the prod­ucts, or us as share­hold­ers for de­mand­ing the banks make ev­ery in­creas­ing prof­its? The de­bate is cir­cu­lar and un­help­ful, at least for now, when we have other mat­ters to pre­oc­cupy our­selves — such as global fi­nan­cial melt­down. We are in a cap­i­tal­ist econ­omy and be­grudg­ingly must pay the price from time to time of the fool­har­di­ness of all of us. It was ever thus and al­ways will be. That is the na­ture of cap­i­tal­ism, and as painful as it is for now, the mar­ket will work it­self out with some help from the Gov­ern­ment spending our money, and the cy­cle will start again.

For those who have cash, the op­por­tu­ni­ties out there are stag­ger­ing and will get bet­ter over the com­ing months. For those who don’t, well, you’re just go­ing to have to hang on and wait for the cy­cle to get you out of the pickle, if you can. It will hap­pen. As far as my prin­ci­pal ac­tiv­ity, com­mer­cial prop­erty, is con­cerned, times are quite ex­traor­di­nary. I’d be sur­prised if any­one who took out a bank loan in the last three years with loan-to-value covenants is not in tech­ni­cal breach to­day, plac­ing the bor­rower at the mercy of the lender. Un­der nor­mal cir­cum­stances that would be very danger­ous. To­day, so long as the debt is be­ing ser­viced, there doesn’t seem to be any­thing the banks can do to rem­edy this sit­u­a­tion, as there is no mar­ket in which to sell into — pri­mar­ily be­cause there is no liq­uid­ity among banks.

The res­o­lu­tion is cir­cu­lar in that the sooner banks lend to one an­other, the sooner a mar­ket be­comes es­tab­lished, and the sooner val­ues be­come more trans­par­ent and an or­derly mar­ket can be­gin to take form. For now the best the bank can do, and they will, is: if a bor­rower is in breach, then the lender will seek to im­pose higher mar­gins and fees on the loan pend­ing the ul­ti­mate dis­posal of the se­cu­rity at some un­known time in the fu­ture. That seems fair to me, pro­vided the bank re­laxes other covenants to en­sure the debt is pro­tected for a sen­si­ble pe­riod.

We start the New Year some­where near the bot­tom of a long cy­cle, and those shrewd in­vestors to­day will look back in years to come and will wish they had in­vested more. Nick Les­lau is chair­man and chief ex­ec­u­tive of Prest­bury In­vest­ment Hold­ings, a pri­vate prop­erty in­vest­ment com­pany

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