Sovereign Subjects: Ask Not Whether Governments Will Default, But How
September 21, 2010
As I am traveling in Europe for a few more days, it seems appropriate to review the very fascinating work of Arnuad Mares of Morgan Stanley in London. He poses the very provocative question: “Ask Not Whether Governments Will Default, but How?” and comes up with some very interesting statistics. He suggests that simply looking at debt to GDP misses the point and offers four other ways we should also evaluate sovereign debt risk. This is a very worthy contribution to Outside the Box.
The question I get over and over as I travel and present my thoughts is “When is the US going to get real about its fiscal deficits?” There is little sympathy for the massive deficits we are running. We are making Europe, or at least the part of Europe I am visiting, very nervous. Let us hope after the next elections we can say we are getting a handle on the deficits, and from both sides of the aisle and not just the Republicans. This is going to require cooperation.
Mallorca is very beautiful, but they have a very small and particularly nasty breed of wasp that has my left hand and fingers quite swollen and sore. But that did not take away from sitting on the balcony with my partners late one night watching a spectacular lightening display as a thunder storm was coming our direction. Then all of a sudden, we saw something that none of us have ever seen.
The moonlight was behind us, and shining through the clouds formed a very clear white rainbow. It was an amazing sight. I will never forget it. Not sure what it is a metaphor for, but I was glad to have witnessed it.
Your sometimes you just get lucky analyst,
What Bernanke Doesn’t Understand
September 6, 2010
This week’s Outside the Box is an incendiary blog written by Steve Keen on debt deflation and GDP growth. I am not certain as to his math (is he double counting debt and consumer spending?) but he does illustrate very well the problem of a deleveraging recession, which I have been writing about for a long time. This is just a different type of recession we are in. So rather than fret over the absolute certainty of the math, read this for an understanding of the nature of the problems we face. He has the direction right, I think, which is the important part for us to grasp.
Then he just now posted a second blog on Quantitative Easing, which he ends with pointing out why it might “work” but also suggests that it would lead to yet another financial bubble. Again, very Outside the Box thinking. It has me going ‘hmmm.”
Steve Keen is Associate Professor of Economics & Finance at the University of Western Sydney, and author of the popular book Debunking Economics. He has won numerous awards and is widely published in academia. Seems quite the serious guy. You can read his material at http://www.debtdeflation.com/blogs/.
Your working on Labor Day analyst,
China’s GDP and Questions of Strength
August 18, 2010
Today I'd like us to think about sustainability. The Mayfly is a species of insect that goes from egg to death sometimes in as little as 30 minutes, and never more than a day. Take note, because as investors we have to be wary of the same rapid fluxes in economies. I'm of course speaking of the hype surrounding the Chinese economy lately. Everyone is talking about China this week, and rightfully so, as its GDP is nearing Japan's and could become the second largest in the world. But is it sustainable? Or a boom-and-bust similar to the Mayfly?
I'm sending you an interview with a STRATFOR analyst who, unlike the hype, says China's economy is weak and unsustainable. Find out what indicators he's looking at by <<watching this video>>. While you're at it, sign up to receive their free weekly intelligence reports. You'll enjoy the unique & global perspective.
GaveKal Five Corners
August 10, 2010
This week we look at some mostly bullish analysis from my friends at GaveKal for the Outside the Box. Much of the letter is devoted to looking at why Europe may fare better than many think (which will make uber-European bull David Kotok happy to read!). But be very sure to read the last page as Steve Vannelli analyzes the latest speculation about the Fed and quantitative easing. All those calling for QE2 may not actually do what they think it will. His conclusion?
"Once again, if there is no growth in broad money, no increase in velocity and no increase in Fed credit (hybrid money), then the only source to finance growth in the real economy will remain the sale of risky assets. When confidence seems to be stuck in a low plateau and talk of reigning in fiscal deficits is growing louder, a policy of undermining the value of risky assets couldn't be more counterproductive to growth."
I find myself in New York this morning (I once again did Yahoo Tech Ticker) leaving for DC later. Then sadly will have to forego Turks and Caicos, but that does allow for me to go to Baton Rouge for a one day course on the affects of the gulf oil spill on the regional economy, helicopter flyovers, etc. I will report back in this week's letter what I learn.
Have a great week.
Your wishing he was still fishing in Maine analyst,
Running through a minefield, backwards
July 27, 2010
Before we get into today's Outside the Box I want to clear up a few ideas from this weekend's letter. There have been posts on various websites equating my piece on deflation with Paul Krugman. They say I am advocating kicking the can down the road and not reducing the deficit.
Wrong. What I have been trying to point out for several years is that we have no good choices. We are down to bad and very bad choices. The very bad choice (leading to disastrous - think Greece) is to continue to run massive deficits. The merely bad choice is to reduce the deficits gradually over time. As I try to point out, reducing the deficits has consequences in the short term. It WILL affect GDP in the short term. Krugman and the neo-Keynesians are right about that. To deny that is to ignore basic arithmetic.
I am not for kicking the can down the road. Not to begin to deal with the deficits, and soon, risks an even worse problem. But - and this is a big but - I don't want to stomp on the can, either.
Now, let's get into this week's Outside the Box. I offer you a very intriguing essay by those friendly guys from Bedlam Asset Management in London. They argue that Belgium's sovereign debt should be suspect, and is the country that could be a "sleeper" problem. This is a very interesting read, with a lot of history. It is not too long and very interesting. Enjoy. (www.bedlamplc.com)
Your thinking sovereign debt is the biggest bubble of all analyst,
Asia’s Paradigm Shift
July 19, 2010
This week we turn our eyes to Asia as my friend Louis Gave of GaveKal gives us a very thought-provoking piece on the problems of investing in Asia, with a focus on China. While there are real opportunities, Louis also sees some speed bumps. Those Asian ETFs may not be the winners a lot of people think for structural reasons.
I was to thank the team at GaveKal for letting me reproduce their research as typically it is only available to their clients who pay a rather hefty sum.
This has been a productive weekend book writing wise. I am down to finishing 2 chapters which are mostly written and two long flights to Vancouver in front of me. Then the hard part of re-writes but I can see the end of the race. Have a great week, and if you are in Vancouver be sure to say hello.
Your writing machine analyst,
Recession, Deflation and Deficits
July 12, 2010
I look forward at the beginning of every quarter to receiving the Quarterly Outlook from Hoisington Investment Management. They have been prominent proponents of the view that deflation is the problem, stemming from a variety of factors, and write about their views in a very clear and concise manner. This quarter's letter is no exception, where they once again delve into the history books to bring up fresh and relevant lessons for today. This is a must read piece.
Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4-billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies. And now let's jump right in to the essay.
The Ultimate Hedge in Economic Crisis
June 2, 2010
This week we have a really counter-intuitive Outside the Box. I was talking with the editor of Breakthrough Technology Alert, Patrick Cox about health care costs and he made some very interesting observations from new research about health care. It seems healthy people pay more for health care than sick people. I asked him to do a write-up for us. Despite the new health care bill that passed, health care costs are going to go up, not down. And that's a good thing, as Pat explains. You really want to read this.
Some of you may not be aware that a few months ago I wrote that I was buying stocks for the first time in 12 years, and specifically smaller, transformational biotech stocks. As I wrote at the time, I think that we could see a real bubble in biotech in the latter part of this decade, and just once, please God, I want to be at the beginning of a bubble.
Pat is one (and maybe the best) of my "go-to" sources for investment ideas in the biotech space. I have been very pleased with the results of his favorite plays in the last few months. And I am glad that some of my favorite companies have seen their prices come back somewhat in the last month or so, as I plan to be buying them for a long time.
Which brings up a problem and an opportunity. Pat's letter is just getting too big circulation wise for the typically smaller companies he finds and writes about. His publishers (Agora) decided last week to basically double the price (and it is not cheap to begin with!) to reduce the number of subscribers. They did a "final promotion" at the old price with a deadline of last week. I just saw that. I asked them to extend that offer for one week to my readers and they agreed.
So for the next week, you can subscribe at a discounted $699 before it goes to double that. Below is a link to the promotional site for the letter. And yes, I know it is very "hypey." I don't like that type of copy, but that is what sells and Agora is in the business of selling letters. My business is to find you good sources and to write about them. In terms of return on investment, this subscription has been a very good one for me. Find out more here.
If you did not get to read his first Outside the Box on the biotech space (and you really should!), and my rationale on why I think there will be a bubble in biotech, you can read that at this link. http://www.johnmauldin.com/outsidethebox/the-coming-biotech-bubble-4391
And without further ado, let's find out why health care costs are going up and why it's a good thing.
Your admittedly a biotech junkie analyst,
The Great Reflation
May 3, 2010
Let me start this week's Outside the Box by venting a little anger. It now looks like almost 30% of the Greek financing will come from the IMF, rather than just a small portion. And since 40% of the IMF is funded by US taxpayers, and that debt will be JUNIOR to current bond holders (if the rumors are true) I can't tell you how outraged that makes me.
What that means is that US (and Canadian and British, etc.) tax payers will be giving money to Greece who will use a lot of it to roll over old bonds, letting European banks and funds reduce their exposure to Greece while tax-payers all over the world who fund the IMF assume that risk. And does anyone really think that Greece will pay that debt back? IMF debt should be senior and no bank should be allowed to roll over debt and reduce their exposure to Greek debt on the back of foreign tax-payers.
I don't think I signed on for that duty. Why should my tax money go to help European banks? This is just wrong on so many levels and there is nothing seemingly we can do. Oh, well. Thanks for listening.
This week we look at an essay by my friend Tony Boeckh, who from 1968 until 2002, was chairman and editor-in-chief of BCA Publications, publisher of The Bank Credit Analyst. He has written a very important book called The Great Reflation. Tony feels that one of the most important things for investor to understand is money flows, whether from debt or monetary easing. The ebb and flow of money can both create and burst bubbles and we are now in what he calls a Great Experiment where governments around the world are trying to again reflate the economy (and are succeeding). What bubbles will this create and how does it end? How should we then invest?
My good friend Marc Faber has this to say about The Great Reflation:
"The Great Reflation is by far the best economic and investment book that I have read in the last ten years. Tony is a seasoned historian, economist, and strategist with a unique ability to explain complex issues in simple, readable terms. These are illustrated with numerous charts on economic and financial trends that put current conditions in a historical context."
—Marc Faber, Editor, The Gloom, Boom & Doom Report
The book is in most bookstores and you can of course get it by going to www.amazon.com and you save 34% and it is available on Kindle. So, let's enjoy Tony's essay.
Your never did like the IMF anyway analyst,
The Making of a Greek Tragedy
April 26, 2010
Back and recovering from my Strategic Investment Conference this weekend (where I decided to give myself permission not to write my usual letter, but I promise I will be back at it this next Friday!) I have spent some time pondering what we learned. It was a fabulous conference. Lacy Hunt, Dr. Gary Shilling, David Rosenberg, Niall Ferguson, Paul McCulley, George Friedman, former Fed Senior Economist Jason Cummins (who is now Chief Economist for Brevan Howard, the largest European hedge fund, and who was quite impressive), Jon Sundt of Altegris, and your humble analyst were all in top form. I must admit with a little pride that I think this is the finest speaker lineup for ANY investment conference anywhere. We were given a lot to think about.
Let me give you a few key points as an intro to this week's Outside the Box. First, there is a bubble building and it is in sovereign debt. It threatens to be a worse bubble than subprime or the credit crisis. Second, at one panel where we were asked what is our main worry, Paul McCulley said "Europe," which triggered an intense discussion, both in the panel and later that night over dinner. I agreed, of course, as I have written that very thing.
Both Paul and Niall think the consequences of a euro breakup could be severe, not only for Europe but for the world. I agree. That is why I have focused so much space in my writing and in Outside the Box on the European and especially the Greek situation. Everyone is hopeful that a major breakup can be avoided, but the problems the Mediterranean countries face are serious. I got the sense that most everyone expects the euro to fall further over the coming years.
In my opinion, there is little hope that Greece can resolve its fiscal crisis in a way that is less than draconian. I see almost no way out without a default of some kind. There will be band-aids and other measures to postpone the day of reckoning, but not to avoid it. They have just gone too far down a road of bad decisions.
Today we look at two short essays on Greece, one from Stratfor (George Friedman was in rare form this weekend) and the other from my friends Eric Sprott and David Franklin of Sprott Asset Management. Sprott gives us some details on a brewing Greek banking crisis and then closes with some thoughts on sovereign debt. He throws this little bon mot at us:
" ... [the US Government Accounting Office] goes on to state, however, that using reasonable assumptions, 'roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020.'"
That is an example of the economic truism that if something can't happen, then it won't. Long before we get to 2020, massive change will be forced upon the US. The question is, do we do it willingly or do we become Greece?
And before I turn you over to the capable hands of Stratfor and Sprott, I have to end with what I think was the best one-liner of the conference (and there were so many). Paul McCulley noted that the debt crisis (the shadow banking system, subprime mortgages, SIVs, etc.) was the equivalent of an under-age drinking party with the rating agencies handing out fake IDs.
Have a good week. (And a special thanks to Lee Stein and David Malcolm for being so generous with their homes and wine cellars, respectively.)
Your feeling like I was drinking information through a fire hose analyst,
UK economy must perform a rebalancing act
April 19, 2010
Long time readers know that I am a huge fan of Martin Wolf, economist and columnist for the Financial Times. His writing is the reason to get the Pink Lady (as the Financial Times is known) as far as I am concerned.
This week's Outside the Box has two columns back to back from last week from Wolf, talking about the problems in Britain which look like the same problem all over the developed world. Wolf argues (rather cogently) that the answer is to increase exports and for a further weakening of the pound. Quoting:
"Weak sterling, far from being the problem, is a big part of the solution. But it will not be enough. Attention must also be paid to nurturing a more dynamic manufacturing sector. With the decline in energy production under way, this is now surely inescapable."
Can I envision the pound at parity with the dollar? Yes, I can. But look at what that implies. It makes it tougher on US exporters just when we need a strong export base. Can every country devalue its currency (or allow it to fall?) as a way to become prosperous? And against whom? Will Europe sit by? What will that do to the US earnings of multi-national corporations? Will Senator Schumer accuse Britain of currency manipulation and want a 25% tariff?
I have made the point many times that not every nation can export their way to prosperity. Someone has to buy! While Wolf has the right prescription for Britain, it is the same prescription that every nation wants to pursue. But we can't all do it at once. Read these columns in that light.
Have a great week.
The European Union Trap
March 9, 2010
Let's start with the conclusion to today's Outside the Box:
"The underlying principle flows from the financial balance approach: the domestic private sector and the government sector cannot both deleverage at the same time unless a trade surplus can be achieved and sustained. Yet the whole world cannot run a trade surplus. More specific to the current predicament, we remain hard pressed to identify which nations or regions of the remainder of the world are prepared to become consistently larger net importers of Europe's tradable products. Countries currently running large trade surpluses view these as hard won and well deserved gains. They are unlikely to give up global market shares without a fight, especially since they are running export led growth strategies. Then again, it is also said that necessity is the mother of all invention (and desperation, its father?), so perhaps current account deficit nations will find the product innovations or the labor productivity gains that can lead to growing the market for their tradable products. In the meantime, for the sake of the citizens in the peripheral eurozone nations now facing fiscal retrenchment, pray there is life on Mars that exclusively consumes olives, red wine, and Guinness beer." - Rob Parenteau, CFA
Let me state upfront that this is not the easiest to grasp Outside the Box that I have sent you. But if you can get what Rob is saying, you will understand why the problems facing the world, and especially Europe, are so difficult. Everyone cannot export their way out of this crisis. Someone has to actually run a current account (trade) deficit.
My suggestion is that you read this once through, and then read it again. If you see where Rob is going, it makes it easier to understand the second time. Warning: Rob Parenteau is an Austrian economist. In many circles, what he is saying is controversial, if not at least counter-intuitive. But it makes us think, which is the purpose of Outside the Box. If I get a response that is robust and thoughtful, I will run it in the future. The problem that Rob articulates is the center of the problems we face. There are no good or easy choices, as I have been writing for a log time.
Rob Parenteau, CFA, is the sole proprietor of MacroStrategy Edge and editor of The Richebacher Letter. He also serves as a research assistant to the Levy Institute of Economics. For those interested, you can subscribe to The Richebacher Letter at https://reports.agorafinancial.com/RCH497ControlPromo/LRCHL300/landing.html (yes, more hyper marketing copy, but that is the link if you want his letter.)
If PIIGS Could Fly
February 2, 2010
I wrote about Greece in last week's letter. Then I ran across this column in the Financial Times by my friend Mohammed El-Erian, chief executive of Pimco, and someone who qualifies to be introduced as one of the smartest men on the planet. It is short and to the point. (www.pimco.com)
Then, somehow my London partner, Niels Jensen of Absolute Return Partners found the time to write a letter while we were running around Europe. As we had a lot of conversations with some very key players, and a lot of debate, the letter reflects a lot of what we learned, as well as further documents the serious straits that European nations face in the coming years due to their debt and deficits. It is not just a US or Japanese problem. I have worked closely with Niels for years and have found him to be one of the more savvy observers of the markets I know. You can see more of his work at www.arpllp.com and contact them at .(JavaScript must be enabled to view this email address).
And finally, many of you are probably familiar with TED Talks. If you are not, you should be. They basically get very smart, creative people to come in and do short talks Tiffani just sent me one of their latest videos. 13 minutes. It blew me away. The world of Minority Report is here, 40 years ahead of schedule. All I could do was just say "Wow!" Its young men like this that should make us all optimists that somehow we will figure out how to get through all this. http://www.ted.com/talks/view/id/685
Eclectica November Fund Commentary
November 16, 2009
Today's Outside the Box comes to us from England. My European partner Niels Jensen from time to time sends me some of the best letters he reads from the hedge fund world. He is an excellent filter for me, and this week's Outside the Box offering is no exception. Below is the November commentary from Eclectica fund manager Hugh Hendry. He challenges the current preoccupation with the falling dollar and China, and posits what would happen if that thinking is wrong? It offers some very thought-provoking ideas. You can contact them for more information at info@eclectica-am.com or visit their website: http://www.eclectica-am.com
Your wondering if we are all turning Japanese analyst,
Liquor before Beer - In the Clear
October 26, 2009
I am in Argentina today, but still have found time to read a rather provocative speech by David Einhorn, who is President of Greenlight Capital, a "long-short value-oriented hedge fund", which he began in 1996. Einhorn has long been a critic of the current investment banking business, and today he discusses the problems with not only the proposed new government regulations (or lack thereof), but also the problems with the US debt and our currency valuations. It is a most thought-provoking and fun speech.
It is especially poignant as I sit in a country that has seen the ravages of hyper-inflation, talking with business leaders and investors who experienced the problems first hand and how they deal with it today. I will be writing about what I am learning this Friday I think. But now I have to run and give my third speech today. Have a good week!
Your very surprised to find Argentinean beef as good as that of Texas analyst,
Quarterly Review and Outlook - Third Quarter 2009
October 12, 2009
I look forward at the beginning of every quarter to receiving the Quarterly Outlook from Hoisington Investment Management. They have been prominent proponents of the view that deflation is the problem, stemming from a variety of factors, and write about their views in a very clear and concise manner. This quarter's letter is no exception, where they once again delve into the history books to bring up fresh and relevant lessons for today. This is a must read piece.
Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4-billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies. And now let's jump right in to the essay.
Growth in Potential GDP
August 17, 2009
This week I offer you two short pieces for your Outside the Box Reading Pleasure. The first is from my friends at GaveKal and is part of their daily letter. They address the real difference between those who think we will have a consumer led recovery (Keynesian) and those who think we will have a corporate profit led recovery (classical economics or Schumpeterian). This is actually a very important debate and distinction. I find that GaveKal pushes me to think almost more than any other group, as they constantly challenge my assumptions. (www.gavekal.com)
The second piece comes from Dr. John Hussman of Hussman Funds (www.hussmanfunds.com). He offers us some very insightful analysis on the potential for growth going forward, which goes along with what I have been writing: We are in for a longer period of below trend growth, which does not bode well for corporate profits in the long run. I think you will get a lot out of these two items.
Slow Long-Term Growth, And Government’s Response
August 10, 2009
This week I am really delighted to be able to give you a condensed version of Gary Shilling's latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary's latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. His web site is down being re-designed, but you can write for more information at .(JavaScript must be enabled to view this email address). If you want to subscribe (for $275), you can call 888-346-7444. Tell them that you read about it in Outside the Box and you will get not only his recent 2009 forecast issue with the year's investment themes, but an extra issue with his 2010 forecast (of course, that one will not come out until the end of the year. Gary is good but not that good!) I trust you are enjoying your week. And enjoy this week's Outside the Box....
U.S. GDP Review—Consumer, Where Art Thou?
August 4, 2009
This week I am in the office for just one day, but I can rely on my friend Dave Rosenberg to give us solid insight on the latest GDP numbers for this week's Outside the Box. Dave slices and dices to show us what really happened. David was the former Chief Economist at the former Merrill Lynch (ah, Mother Merrill, we barely knew ye.) and is now Chief Economist at Gluskin Sheff + Associates Inc., which is one of Canada's pre-eminent wealth management firms. Founded in 1984, they manage $4.4 billion. David notes that the data gives us a mixed picture.
I am in Maine later this week. It is likely I will be on CNBC, as they will be shooting live from our fishing camp. Also, they plan to do a one hour special with a number of interviews. I will let you know when it airs. A quick note from me: The third quarter is likely to be positive, especially given the success of the "Cash for Clunkers" program which it looks like our Congress is going to pass another round of spending which taxpayers (our kids) will get to pay off, or more likely pay $50 million per years for decades in interest. Sigh. Essentially, we are moving up car sales today which would have been made later, except that if you can get someone else to make your down payment, why not make that purchase today? A very reasonable response on the part of the consumer.
A teaser from Dave's work below: "Consumer spending came in at -1.2% annualized, twice the decline expected by the consensus. This occurred in the face of gargantuan fiscal stimulus and leaves wondering how this critical 70% chunk of the economy is going to perform as the cash-flow boost from Uncle Sam's generosity recedes in the second half of the year. Imagine, government transfers to the household sector exploded at a 33% annual rate, while tax payments imploded at a 33% annual rate and the best we can do is a -1.2% annualized decline in consumer spending in real terms and flat in nominal terms? What do we do for an encore? In the absence of the fiscal largesse, it is quite conceivable that consumer spending would have shrunk at a 10% annual rate last quarter!"
Encore, indeed.
Should the Fed be Responsibly Irresponsible?
July 20, 2009
This week I offer two short essays for your reading pleasure in Outside the Box. The first is from Ambrose Evans-Pritchard writing in the London Telegraph. He gives some more specifics about the situation in Europe I wrote about this weekend.
He ends with the following sober quote: "My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin." This is a must read.
And the second piece? Last week in Outside the Box we looked at an "Austrian" (economic) view of the inflation/deflation debate from my friends at Hoisington. This week we look at the 180 degree opposite with Keynesian aficionado Paul McCulley, who argues that the Fed should be Responsibly Irresponsible and target higher inflation. This essay has brought some rather heated arguments in print and from some of the people who will be with Paul and me at the annual Maine fishing trip. And you can bet I will put them all together with a little wine to see how the argument ensues. I will report back.
And Paul ends with a great and what is a quite controversial line, "Yes, as Bernanke intoned, there are no free lunches. But no lunch doesn't work for me. Or the American people. While it is true, as Keynes intoned, that we are all dead in the long run, I see no reason to die young from orthodoxy-imposed anorexia."
And finally, this one last note on European banks: "European banks including Societe Generale SA and BNP Paribas SA hold almost $200 billion in guarantees sold by New York-based AIG allowing the lenders to reduce the capital required for loss reserves." (Bloomberg). Want to think about the US taxpayer paying to bail out Europeans banks? Think that might be a tad controversial? This could be explosive.