Thursday, 30 June 2011

Absolwent SGH

I think my second academic degree obtained in the time of running this blog is not a reason to rename the address of the blog, nor to change the nickname which is quite widely recognised in the Polish-English blogosphere.

The Master's exam I somehow passed today didn't go as smoothly as the Bachelor's exam. Many think such exam is just a formality that marks the end of one studies, at Warsaw School of Economics it's not a piece of cake, but on other hand something doable and not worth the whole stress that plagues would-be graduates. The Polish word obrona, literally "defence", fits quite well the character of the exam, sometimes you have you to prove you deserve the title of MA.

This time, unlike in 2009 I didn't buy and flowers, chocolates, nor any other gifts for the examiners. After all they do the job they are paid for and don't do me any favour that they come. The supervisor of my MA thesis turned up at proverbial "eleventh hour" (three minutes before the exam) and dashed off just after the result was announced, as he hurried to go back to work, the reviewer of the thesis didn't show up at all, but sent a stand-in who didn't even bother to stir up any problems. And the examiner in economics, despite being hailed as "the nitpicker" was surprisingly lenient.

So... If you happen to drop in on the McDonald's restaurant at the corner of Marszałkowska and Świętokrzyska for a portion of french fries, please place your order cordially:

Szanowny panie magistrze, poproszę frytki

Tuesday, 28 June 2011

No mercy for risk-takers

Sometimes you can hear a widespread opinion that financial markets resemble a casino, sometimes you are told prices of financial instruments do not reflect their fundamental values, but follow a random walk. Even if these assertions are half-truths, they must not be disregarded by anyone who wishes to be a market participant. If you enter a financial market, no matter if you buy, sell, borrow or lend, you take risks. Come to terms with it, put up, or ship out!

Over two years ago Poland witnessed sad stories of companies which speculated on currency options. In 2008 zloty strengthened, its appreciation was potentially detrimental to exporters, for who export sales would no longer be cost-effective. Banks found a solution to their problems – stricken exporters were offered an opportunity to buy currency options on sale of EUR at fixed rate, usually higher than market one. Unfortunately, such a hedge had to cost, so banks came up with a strategy called risk reversal. The rest was once described, there’s no need to repeat it.

Broadly at the same time, in 2008, Polish zloty (hereinafter PLN) hit its high against Swiss Franc (hereinafter CHF). Mortgage loans denominated in CHF were extremely popular in that time, as the housing boom was at its climax, and CHF gave the opportunity to have lower debt service costs, thanks to gradual decline of CHF/PLN exchange rate and lower interest rates in CHF. Then came the turmoil on financial markets and PLN plummeted against currencies of highly-developed countries, deemed to be safe havens. In early 2009 the trend again turned back and zloty’s value in other currencies was back increasing. 2011 saw Greek crisis and printing money in the United States, so EUR and USD began to be regarded as riskier assets, while CHF still enjoyed the status of safe haven and kept strengthening against other, also major, currencies. In July 2008 CHF/PLN rate was at its ever-time lows at around 2.00, in June 2011 it climbed near 3.40. This translates into financial standing of homeowners who have taken out loans in CHF in 2007 or first eight months of 2008 when CHF/PLN rate ranging from 2.00 to 2.50, and who now are facing a problem of mounting debts. Currently many of them have so-called negative equity (what’s the Polish for negative equity?), what means their outstanding debt is higher than the market value of their property, but this is not yet the biggest problem, since as long as they settle their monthly payments in time, banks do not raise any alerts. The bigger problem is posed by rising debt service costs. Monthly instalments, as loans, are also denominated in CHF and then converted into PLN. If a debtor’s rate is 500 CHF, holding everything else unchanged, when CHF/PLN exchange rate was 2.20, a monthly payment was 1,100 PLN. When the rate soared to 3.40, the instalment soared to 1,700 PLN. Makes a difference, doesn’t it. When loan repayments make up a small portion of a borrower’s income, a borrower stays afloat, but if a borrower could only make ends meet when CHF/PLN stood below 2.50 PLN, a borrower is distressed.

The parliamentary election is coming and politicians search for various ways of “buying” votes. Election year is usually a period when politicians from ruling parties are more eager to give away gifts and those staying as opposition have inclinations to come up with promises of gifts they will give away if they win. Some of the Polish politicians have taken a leaf out of Hungarian book and put forward to freeze the CHF/PLN rate at 2.75 for the borrowers who have taken out mortgage loans in CHF at rates lower than 2.75. The difference between the market rate and 2.75 would be paid by the state. But who is “the state”??? Yes, my reader, it’s you, it’s me, it’s every person and every company that pays taxes in Poland. And this ridiculous idea is just another bail-out. Someone has taken a loan in a foreign currency and exposed themselves to a currency risk – cool, now they have to face the music. The scenario in which CHF/PLN goes up by at least 50% should have been taken into account when the decision to take the loan was made! And banks should have prepared sensitivity analyses, but as far as I know the recommendation of Polish Financial Supervision Authority that curbed lending in foreign currencies came into force some two years too late…

This is actually not the first time, in 2009 deputy prime minister Pawlak proposed to cancel legally valid option contracts between stricken companies and banks. The idea to freeze the CHF/PLN rate is not as shockingly silly as the Pawlak’s attempt to turn back time, but will not meet my approval.

On this blog there will never, ever be any consent for bailing out risk-takers. Either you take a risk and accept the rules of the game – you win or lose, or you just don’t engage in risky transactions. If there is to be a relief for troubled borrowers, why doesn’t somebody return me let’s say 200 PLN out of almost 900 PLN I lost recently on the stock market? I knew how aggressive speculation could end up and this time the worst scenario materialised. I made a mistake and covered the loss-making position far too late, thus incurring a bigger loss, but I’m the only one to blame, and I have no right to moan, just as some people with “encumberance in Swiss currency” do. I’m sick of listening to them griping and tell them politely that if they made their bed, they have to sleep in it. And they politely shut up… Maybe I’m ruthless, but those people really have to suffer consequences of their decisions.

Keep your fingers crossed on Thursday, between 10:30 and 11:00 a.m.

Wednesday, 22 June 2011

Gone is the longest day

A small anniversary - this is my 250th post - I'm half way towards being half way to hitting one thousand posts :)

Today a slightly "Jeziorkish" post - I strolled around my neighbourhood between 8:00 p.m. and 9 p.m. to snap some pics during the last hour before sunset. Picked out a few best and shared them here.

To the right - houses and historical (built in the first half of the nineteenth century) church in Stara Iwiczna. Typical for this time of the year in the evening sunrays illuminate northern walls of the buildings.

To the right - ul. Mleczarska which marks the border between Piaseczno and Nowa Iwiczna, here looking north from the intersection with ul. Energetyczna. Traffic not very sparse, but it's the beginning of a long weekend (I fail to notice this being burdened with learning).

To the right - a beatifully sunlit row of terraced houses by ul. Mleczarska in Piaseczno. As I passed by I didn't spot any of the dwellers in their gardens. Ain't it a sin to stay in when outdoors it's so glorious?

Again to the right - yet another view from ul. Mleczarska. The sun is blocked out by a foliage of a tree, but the last subeams manage to break through between the leaves. Magnificent? I'd be wary to  gloat over this photo. The upshot of my mini-outing I present here do not really come up to my expectations...

Surprise, surprise - I'm taking you back to late winter 2010, thaw is in overdrive, big snows are melting to uncover dirt, rubbish and turds.

And broadly the same place almost 16 months later, when summer takes over. Field in the foreground is overgrown with some oak, wheat, potatoes or God knows what else, houses in the background have been completed. All in all the atmosphere of the place remains slightly dull...

I turn around to snap houses on ul. Zimowa, I'm looking west, but the magic is gone after the sun has been occluded by clouds. Rains and storms are about to set in over the night.

Curiosity - to prove how infrequently I dabble in photography some stats - today I took my 2000th snap with my compact Canon and I've used it since July 2007. Shame...

Saturday, 18 June 2011

Are we in 2008?

The title sounds at least weird, but this is exactly what occured to me quite recently. A few days ago I waited for my friend outside her office and I remembered the time when we met, during our internship at M********* Bank, it was in summer 2008. We looked back on those times and I put our memories into a broader, economic perspective. Then I discussed it with my colleagues at the office and they shared my observations. Three years have passed and economic situation is disturbingly similar to that in 2008. Just come to think of it...

There is a rally on commodities market, just like in 2008.
Rising prices of commodities have sent the inflation rising, just like in 2008.
Stock market has been underperforming for while, although scale of the correction is not as huge as in summer 2008 when the correction turned into a full-blown bear market.
Pace of GDP growth in developed economies is slowing down just like in 2008, there is a serious threat of double-dip recession in Japan and United States.

In 2008 world saw a spectacular turmoil on financial markets following the bankruptcy of Lehman Brothers bank. In 2011 we might witness a similar disaster. This time the biggest sore points are Greece and USA.

Problems of the former have kept us company from May 2010, when it transpired the country would be soon unable to roll over its debts. The default was somehow staved off with a huge bail-out package, but the issue remains unresolved and pain in the necks of European politicians and bankers is getting more and more severe. For the last 13 months Greece has been effectively a corpse, artificially kept alive by a drip of money flowing from the IMF and EU. If it hadn't been for those loans, the stricken country would have gone insolvent on 19 May 2010. This was fended off by the EU mostly because bondholders of the Greek government are mainly French and German banks, which had bought Greek gilts after collapse on sub-prime securities market, as government bonds were at that time deemed to be a risk-free investment. Those banks, if Greece defaulted on its debts would have to write off large sums of money, losses would deplete their equity, or even gobbled them up at all. To prevent a knock-on effect, governments would have to shore up capitals of those banks, but in 2011 it wouldn't be as easy as three years earlier. Then government bonds were treated as safe haven and so called "investors" were eager to help the governments meet their borrowing needs. Today, as government bonds are more or less risky assets, it would be impossible to finance another bank bail-out programme, or at least it would be hard, as potential debt buyers would require a generous rate of return. EU countries are bending over backwards to stave off the Greek disaster, but this looks unfeasible. If the next tranche of the EU / IMF funded rescue package is to be disbursed in July, Greece has to pass an austerity programme that would involve tax hikes and painful cuts in expenditures. Greeks, accustomed to welfare and bunking off, don't give a green light to the programme and the odds it will be carried out are getting lower. If Greece fails to meet requirements set by its lenders and the lenders don't give in and turn a blind eye on Greek governments fecklessness, the real bankruptcy is in the offing. And even if the next tranche is disbursed, problems of the country and its creditors won't be solved, but only postponed. Best case scenario for bondholders is soft restructuring, meaning write-downs on Greek government securities will bemade over time. And Greece itself is poised for a downfall, well-earned downfall... Grrece has long been effectively bankrupt. Everyone realises it, and everyone is afraid to speak it out.

USA are in a slightly better situation. For no apparent reason their debt is rated AAA, despite the fact the country is on its way towards a technical default. If the congress, where republicans have the majority, doesn't raise the debt ceiling by 2 August, the US government will have no money to buy back its treasury bills (by rolling over the debt), what means effective insolvency. Funnily enough, rating agency can downgrade US rating only if the debt ceiling is not increased. So if they keep on running up debts, triple-A rating would be reaffirmed. A farce? No, this is real, so the rating agencies grading US debt as prime investment are in for a disredit comparable to the one with sub-prime securities and Lehman rating. But United States have a way with its creditors that Greece doesn't have. USA can print as much money as they want and monetise their debt - this is the only way it will can be paid off, with the detriment to those hapless guys who hold US treasury bonds. I hope Barack Obama's face will adorn $10,000,000 banknotes and Ben Bernanke will deserve to look at Americans from a $100,000,000 note.

I'm looking forward to both imminent defaults. Both wretched Greece and wretched United States have worked hard to go default and there's no point in averting it. Of course many economists and probably all politicians would disagree with me and do their best to ward off the bankruptcies, as these bankruptcies would give rise to a turmoil on financial markets much bigger than the one following Lehman's collapse. Indeed, they would, but we need to suffer this stress to clean the air and finally learn the lesson from the crisis. Price for living beyond our means should finally be paid, conclusions should be drawn, bail-outs should become thing of the past, moral hazard should recede to the realm of academic discussions on economics.

But they won't...

And please don't ask me what the safe haven for money now is.
Government bonds - no longer
Stocks - will plummet
Commodities - will plummet
Bank deposits - why not, but given the current inflation profits in real terms are negative.
Gold - seems overvalued
Properties - somethign tangible, but don't expect the market value to increase in the coming years...

Sunday, 12 June 2011

Won't make it before Euro 2012

Not much time has passed since I wrote about privatisation flop, but BGŻ IPO is a petty failure in comparison to big delays in Polish big road construction programme.

The road-building programme in Poland is one the longest ever developed in the world. Its beginnings can be traced back to late 1970, when socialism in Poland reached its growth limits and central-planned economy began to wound down. Late 1970s were the time when construction of Berlin-Moscow motorway was due to kick off. It did get under way, but soon works ceased for next 30 years. 1980s were the time of dreadful economic misery; in 1990s few roads were built. Road construction programmes saw better days in late 2000s, but the pace of development was surely too low. Before workers coul set out to work, clerks had to get to grips with all bereaucratic procedures that drag on and on. Then local residents showed how NIMBY approach works in practise, at the very end some eco-terrorist chained themselves to trees and put back to onset of construction works.

Finally, Poland became a big construction site (to draw on official propaganda dictionary) in 2009. Bereucratic procedures were completed, National Road Construction Programme was passed in parliament, Poland received a generous cash injection from EU funds for investments in infrastucture and, last but not least (to make the post look like a school essay) there was a big motivating factor that spurred the road construction spurt - the imminent Football Championchip due in 2012. According to all plans, most expressways and motorways are due to be opened less than two months before Euro 2012.

A big stride was essential if Poland wanted to play host to one to two millions of football fans coming from all over Europe. Our infrastructure was so run-down and underdeveloped that it required a huge effort to bring the whole mess into order. It was doable, but everything was launched far too late and schedules were so demanding that a small delay could pull the house of cards down. The time for facing the truth has come.

Real problems emerged recently. The glitch in construction of stairway on the National Stadium in Warsaw will postpone its opening ceremony by a few months, but it still doesn't herald any disaster, as it will be opened a few months before the first football match kicks off. Other stadiums are currently finished and they will be completed. Worse is the case of motorways, with key section linking Łódź and Warsaw. Tenders for five sub-sections have been won by three companies, including a Chinese overseas construction company - COVEC. In May it was revealed that COVEC failed to pay its subcontractors, the Company had serious problems with liquidity and it turned out that the construction project was beyond their capacity. Works on construction sites have been suspended and now the Polish government runs negotations with the Chinese company. The infrastructure minister avowes the motorway will be 'passable' (not mistake for 'finished') in early June 2012, but there are few people who believe it...

There's no doubt this motorway is simply vital to make driving from Warsaw to Poznań bearable. Actually from Warsaw to Poznań it even is, but the other way round it is much worse. Once you get off the motorway in Stryków, the ordeal begins. I travelled there last time in April and the journey lasted over six hours - average speed was then lower than 50 kmph... Next time I'll go to that Client by train...

For me much more necessary is the southern bypass of Warsaw which should facilitate everyday commuting to work. It is also quite sure that the section from Konotopa to Airport will not be finished - progress on construction of some junctions is pitiable and there is no chance it will be caught up. Plus there are some other obstacles, such as a council block still waiting for a demolition with its dwellers waiting for an eviction. Until today I had some glimmer of hope for construction of "Elka". Today I ventured to scrutinise the progress of works on the junction of the bypass and expressway towards the airport and ul. Marynarska and all my hopes were dashed...

I ventured there in the morning. The route, taken with all possible shortcuts, was covered on bike within 35 minutes. To the right - I cycled through a path linking Mysiadło and Jeziorki, at this time of the year more and more overgrown by grass and weeds, yet still cycleable. Just after taking this shot my camera signalled its battery was low so I gave up snapping until reaching my destinantion. Later it turned out it just bluffed, just like every mobile phone does when it cries for charging long before a battery is down...

I went up ul. Nawłocka, ul. Trombity, ul. Kórnicka, ul. Baletowa and the pot-holed ul. Hołubcowa. Then turned left and trespassed onto private property (I noticed the peculiar traffic signage on my way back, I still have remorse, caused by my innate respect for other people's privacy).

Then came the inspection. To my surprise ul. Hołubcowa still cuts across the bypass. The tarmac wasn't even ripped off the local street. Looking east - looks like a road in the future. In a distance one can see a flyover that takes ul. Poloneza over the expressway.

Looking west - and I'm totally disillusioned - the tunnel under the tracks is not digged in. When peeking at the site from trains I suspected the works were much more advanced, in fact the tunnel under the tracks still waits for its time...

Seeing the site from the train has the drawback of seeing everything very shortly. Getting there on foot doesn't give the opportunity to see everything anyway. Access to most parts of the site is restricted, and this is correct, but little can be seen if one does not look from above. To the right - I suppose this is a viaduct that will take the regular S79 road towards ul. Marynarska. Or not...

I took two more photos, but as they show very little stuff, there's no point in uploading them. The whole journey wasn't as enjoyable as planned, as despite hanging around for over a quarter I couldn't even snap any plane touching down... On the site the camera did not moan about battery running low so on my way back I could indulge in snapping... To the right - ul. Hołubcowa near ul. Sztajerka - a really enchanting place, but I wouldn't dare to go there by car... Unless I was a SUV-owner... Not, this is not a reason, nor a justification to buy such ridiculously big vehicles...

The next snap shows a run-down house by ul. Baletowa. Three years ago part of the roof wasn't sunken...

Where ul. Kórnicka meets ul. Trombity I turned back and spotted billows of smoke wafting somewhere over Okęcie. Back home I checked the news in the Internet and found out another bus was ablaze...

And at the very end, another pot-holed road, ul. Nawłocka. I don't know who imposed a speed limit of 40 kmph, as I would be afraid to drive there at more than 20 kmph, unless I was very intent on doing down underchassis of a vehicle... Maybe in a winter driving here on beaten snow would be safer...

At the end of the day I've reconciled to the thought these roads won't be finished by the football championchip, I don't want them to be finished that soon because I know haste would do more harm than good. I would rather see them opened in two years and finished properly. And for June 2012 - time to think about taking holidays and staying away from Warsaw when crowds invade the capital :)

Sunday, 5 June 2011

Between the generations

Not uneventful weekend comes to a close. Suntan is itching the skin, temperatures stay unrelentingly high, the blog reminds about the duty of weekly dose of writing for posterity (number of comments under recent posts and google stats imply the interest in my blogging diminishes, as my lust for thoughts-sharing does). Nevertheless, I promised myself and some other people to soldier on. If the weekend is about recharging batteries, blogging can be a part of it, even if it means staring at computer screen.

Over the week there's little time for posting (I'll try to change it when days get shorter), as most of the time is filled by work; and the post is dedicated to work-life balance. The concept, growing on popularity over the last decade, became an inspiration for Gazeta Wyborcza journalist, then the link to the article was spread on facebook, through which I've found it. I've read it, read it over, taken the trouble to go through the thread of over 300 comments and I'm still left with ambiguous feelings.

The article sets out two different types of approach to work, represented, in the author's view, by two generations which clash at workplace. The author call them respectively: 'Generation X' and 'Generation Y'. Here comes the first trap - these names are misnomers. My English-speaking readers probably are familiar with sociological concepts of Generation X and Generation Y known in the Western Culture. Polish society, until 1989 shaped in the shadow of being a part of Soviet bloc, couldn't evolve as Western societies did, so these names can't apply to Poles. Maybe for that reason the author decided to redefine Generations X and Y. Brief description below:

Generation X:
- loyal,
- available for employers in their free time,
- often think that Y's are simply lazy,
- tend to work overtime and keep late hours in offices, because they want to show their commitment.

Generation Y:
- private life is more important than work,
- work mustn't collide with pastime activities - go to the gym in the morning and can't knock on at 8:00 a.m. - don't take this job,
- work is just means that leads to the end (making the most of life),
- during job interviews openly express their expectations about earnings and perks,
- prefer flexible working hours,
- fail to accept rules set by corporations,
- prefer task-based working time, rather than nine-to-five jobs.

I told about the article some of my colleagues from the office, they read it and the next day we had a short discussion during the lunch. They also ended up in two minds about what the perfect approach to work is. None of us opted directly for X nor Y, we all could discern downsides of each approach.

If you are 'X' you risk a lot. You spend a lot of time at work and little having fun. There's a shortage of time to spend recharging batteries. If work fills your time, you have less time for hobbies, for family, friends, your life begins to be empty. To fill it in, you can either break away from the treadmill or work even more and more (until you drop). Staying longer at work and working overtime (often without being paid for it) is another plague - employees are on every beck and call of an employer, ready to give up their private plans to work more.

If you are 'Y', your expectations and inflated and you should after all learn some humility. Life is not only bread and butter, but you have to earn a livelihood somehow. Coming to a job interview with exorbitant demands gives an instatnt impression that a candidate can only take and refuses to give. An 'Y' employee can be unreliable, flexible working hours may mean they will show up at work late, go home when it's convenient for them. If you drill down into comments to the article, you'll surely read lots of stories of people who encuntered typical 'Y' employees and spoke anything, but highly about them.

All things considered in our assessment of two approaches, we've leant towards 'X'. My colleauges appreciate the importance of private life, but during our talk they looked back on good time in banking (years 2002 - 2008) when salaries were high, bonuses were sky-high, deals were pulled off one after another, companies were queuing up for loans, banks were foisting loans upon companies and... they worked 60 hours per week. They said this was the price to pay for opportunity to develop and earn a lot of money. There must be a trade-off. Either you choose to work eight hours a day and knock off, earn less, don't get promotions and have more free time, or you work more and climb the leader of career. You just can't have the cake and eat it. I was also advised to make best use of those years before I get married, as the best time to learn is when one doesn't have much obligations. So what's the definition of making the most of life: having fun or working twelve hours a day? I work around up to nien and a hlaf, but only if the task require to do so, if not, I knock off at time - no need to show my manager my dedication by staying longer than necessary.

And we've come up with an explanation why with time approach to work has changed. Those people who come under "generation X' grew up some time ago, experienced austerity of late PRL, atmosphere of early capitalism and, the overacrhing point, unlike 'generation Y' weren't spoilt by abundance. Xs' parents didn't give them everything they wanted, but they had to earn it with their own sheer hard work. Ys in their childhood, teenage years and as student would usually receive everything from their parents and this has spoilt them.

Personally I have to admit, unlike my peers, I'd also rather identify with 'X' concept. The 'Y' approach smacks of selfishness and complacency. Young people who enter job markets with inflated expectations are in a way similar to trade unionists - both appear to me as spongers...

Next posting, providing no sunstroke along the way will be rather 'light' (less serious) and spiked with photoes