I've been following (with great financial-geek interest) the drama that has been going on at the place where we do our banking here in Switzerland - UBS. While we were in Paris last weekend, I read an article in the April 5-6, 2008 edition of the International Herald Tribune that simultaneously amused me AND ticked me off. The article was called: 'What Went Wrong At UBS? Investors unleash fury at executives, and the U.S.' The article discussed UBS's recent annual meeting that took place at Basel's St. Jakob Hall. Here are some excerpts from the article:
The target of [the UBS shareholders'] anger was not just the UBS chairman, Marcel Ospel, or any of the bank's other top executives, who were arrayed under a giant screen near where goalies usually tend the net. Instead, much of their ire was aimed at the United States itself - specifically, an addiction to high-octane risk-taking, easy credit and dubious financial assumptions that created the domestic mortgage mess is the first place.
"The American El Dorado has become a scene from a Western," declared one Swiss shareholder... UBS was the figurehead of Swiss business. As a good housewife, I know you shouldn't put all you eggs in one basket. A bank is not a casino."
Thomas minder, a local attorney and shareholder advocate, was even more outraged. "What happened here is a scandal," he thundered. "You're responsible for the biggest loss in the history of the Swiss economy. Put an end to the Americanization of the Swiss economy!" At that point, Minder charged the podium, only to be dragged away by security guards. [bold print mine]
After the amusement of my image of a Swiss man being dragged away by security guards at an annual meeting in Basel wore off (Danger in Switzerland! How fun!!!), I kind of began thinking about the whole "blaming America" thing.
For one thing, I sure didn't hear too many Swiss people complaining about "...the Americanization of the Swiss economy" when UBS's stock was at CHF 80 per share, and they were raking in record profits - in part because of their positions in American subprime mortgages. Yes, at one point they were actually paying off - BIG TIME! Hey, but don't worry - nothing but blue skies ahead! Right?
Past returns are no guarantee of future earnings! Have you ever heard that one before? I sure have! Yup, every single quarter when I have a meeting with our investment adviser regarding our investment portfolios. Even though he's been our adviser since 1991, he still says those words to me at some point each and every time we meet. You've never heard that before? Well then, I guess it must be...
The American economy began marching toward recession, the whole subprime mortgage fiasco reared its ugly head, and the UBS stock price plunged over 50% in less than a year's time. I read about a shareholder who bought the stock at CHF 80 per share, and he sold it several months later at CHF 40 - a 50% loss. "I lost 50% on my investment," he cried. "Hmmmm," I thought, "...he bought a stock right after a company announced record profits and their stock was at an all-time high." Buy high and sell low; interesting investment strategy you have there. Perhaps you didn't read about the looming downturn in the economy, oh, at least every day for the past year or so like I did. No? Yeah, I know...
Is it America's fault that, according to the April 5th 2008 edition of The Economist:
...[UBS] got American mortgage derivatives so spectacularly wrong. Surely UBS's 3,400 risk managers [bold print mine] should have spotted the rocks ahead? The dangers hardly showed as a blip on their elaborate risk charts.
Wait a second. That's...