Gstaad
Elie de Rothschild, who died a couple of weeks ago while on a shooting trip in Austria aged 90, once told me the story of a young Arab kebab seller who always parked his stand across from la Banque Rothschild on rue Lafitte. The Arab was asked for a loan by an acquaintance of his. ‘Look here,’ he told the man, ‘I have a deal with the bank across the street. I will not lend money and the Rothschilds will not sell kebabs.’ End of story, as they say.
I thought of Elie, with whom I used to play polo, when the you-know-what hit the fan last week. Bankers should act like bankers, and not kebab salesmen. The latter try to sell to anyone within hearing distance. In the good old days, bankers lent money to those who could repay. When greed set in during the go-go days, they started lending to people unlikely to repay them. But there was a catch. The bankers covered themselves by selling the bad loans to others, greedier than themselves, and made a profit out of doing so. The Ponzi scheme has now caught up with them, hence the blood in the markets.
So, what happens next? If I knew I would tell you, but I don’t. What I do know is that we have a huge credit bubble, and debt is piling up on top of debt, and that can’t be good. Personally, I blew it. I wanted to do a Bernard Baruch of 1927, or a Jimmy Goldsmith of 1987, then got lazy and didn’t bother to play my instinct. Never mind. I have never owed anyone anything, so I’m fine, but I do worry about friends who live on the edge.
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