Credit Suisse...

…has become a history. The demise of the legend of the European banking might symbolise a mini-banking crisis witnessed in early 2023. I deliberately underline its small scale, as comparing to the meltdown in late 2008, the current tribulations pose no major risk to the financial system. Nevertheless, the insolvency of the Silicon Valley Bank has reminded about terms such as bail-out, Chapter 11, deposit insurance.

The sixteenth largest bank in the USA had a quite specific portfolio of risky exposures to tech start-ups and venture capital businesses. Many of them no longer thrived as the pandemic officially came to an end, so online ventures had to wind down. Besides, several businesses could not withstand interest rate hikes to level unseen in the USA since 17 years. For one of the banks this turned out to be a recipe for a disaster, while the rest of the banking sector carry on. Investors indeed reacted to the collapse of SVB, but the sell-off on stock exchanges reflected uncertainty, rather than panic.

Credit Suisse going under has surprise nobody keeping track of the banking sector and the takeover by UBS is to ensure a soft landing to the financial system. The lesson to be learnt is to keep away from murky institutions, a label Credit Suisse had worked hard for. On this occasion I recalled being recruited by CS in 2017 and being turned down on account of exorbitant expectations towards my pay. Time has proven that deal was not meant to be nailed down.

The recent opinion of European Court of Justice on inequality of rights in case a CHF mortgage loan agreement is nullified also cast a shadow of doubt on stability of the banking system in Poland. In fact whoever panics is overreacting. The mortgages in CHF are in fact being slowly written down for nearly a decade and most of the burden has been absorbed. As tackling the problem was eventually spread over time, losses could be gradually absorbed by banks. Currently only some banks with the biggest exposures to mortgages in CHF might be in need of capital injection is the ECJ ruling (binding, unlike the aforementioned opinion), but the risk of a Polish bank being on a brink of collapse is low.

Investors feared the turmoil in the financial sector could spill over to the real economy, hence stock exchanges and commodities were in the red in March 2023. If you bet the markets are overreacting, than an opportunity to buy up underpriced assets has cropped up. Lower prices of crude oil and other commodities can also contribute to faster disinflation, which in turn is likely to boost economic revival.

Prague

While staying in Szklarska Poręba, we hatched the idea it would have been a shame not no pop in on Prague, which was mere 130 kilometres away. We ventured there on Saturday, 4 March and it was my first foray to the capital of the Czech Republic since 2001.

To the right – after an ascent through Petrinske Sady park we reached the Hrad hill from which one can delight in a remarkable panorama of the old town and districts of the eastern bank of Vltava. The weather was not splendid, overcast skies and +4C.

Having ambled around the Hrad hill we headed towards the Charles Bridge and passed by the John Lennon wall, which oddly enough is listed as one of main landmarks of Prague by Google Maps.

Having shunned crowds and paid entry to the Golden Lane we roamed past the afore- mentioned bridge which turned out to be the most crowded place out of those we visited. Prague’s historical part looks definitely superior to the one of Warsaw, fully destroyed during WW2.

The market square in Prague still suffers from excess concrete (betonoza), insufficient greenery and not prohibited access of motor vehicles. That very venue was actually a letdown.

Incidentally, we ran across the spot I best remember from my school trip to Prague in 2001 – Vaclavske Namesti alley and the Narodni Muzeum in the distance. The place is also (in)famous for picture of soviet bloc intervention in Prague in August 1968. Note Marks & Spencer has not wound down its business in Czechia.

Back close to the Cerni Most P&R close to Prague’s Metro B line terminus, where we left the car for the entire day for the equivalent of PLN 10. For those visiting the capital of the Czech Republic an excellent solution, since the car park is just 2 kilometres away from the motorway. On my way back I was snapped by the speed camera – for driving 59 km/h were the speed limit was 50 km/h I was fined the equivalent of PLN 200, which I duly paid. I must admit our southern neighbours are less tolerant to those speeding and do not take their time in chasing the disobedient motorists. I Poland road authorities and the police turn a blind eye at speeding below 10 km/h and photos from speed cameras arrive months, rather than a week later.

Nordic Skiing

Back from my first winter holidays (other than in a warmer place) ever. And back from an invigorating experience of acquiring a new skill from scratch. As a 35-year-old man I wore ski for the first time in my life, which was a kind of scary, yet thrilling. The originator of the trip was my girlfriend, since over 5 years a keen ski-runner. Once the school winter holiday were over, we headed for Szklarska Poręba, a favourite destination of ski-runners in Poland.

Dolny Śląsk is my favourite province of Poland, having its spirit regardless of the season of the year. I ventured there in 2019, 2015, 2013 and in 2009 (this reminds me PES will turn 15 in less than a year) and I am quite likely to return there more often. 

The drive (within speed limits) to Szklarska Poręba takes some 5 hours door-to-door and (sadly) beats the train connection, whose duration is nine hours, if you choose a direct connection. But if you choose the train and get off at Szklarska Poręba Górna station, such splendid view will be the reward for the length of the ride. The highest mountain to the right is Szrenica. Pay attention to the weather – during 5 out of 7 days of our stay we enjoyed clear blue skies and temperature fluctuations from around –10C at nights to close to 0C in early afternoon. The snow had fallen just before our arrival.

Szklarska Poręba is hilly and full of contracts. Many blocks of flats for rent have been built in the recent decade, but run-down old buildings are still in abundance – the one snapped to the right could be turned into a jewel, if properly renovated.

Now a shot for train anoraks, with Newag-built Koleje Dolnośląskie train. Szklarska Poręba Górna is where trains from Wrocław, Warszawa and Liberec terminate. Trains to Wrocław and to Liberec (via Jakuszyce and Harrachov) run once an hour, but long-distance services from the capital can be spotted there only twice a day.

Such enchanting encounter with the nature was probably meant to enchant me. Crisp snow, with ski tracks prepared, forest, sunshine. I am far from the civilisation, far from work, far from things which bother me.

I must confess I had had plans to learn Nordic skiing in Warsaw, but recent winters rarely brought a sufficient deep snow surface and eventually I ended up moving on skis for the first time on 27 February 2023. I took a private lesson with an instructor, which was definitely a good choice. In my age catching the coordination of body movements and learning to keep the balance takes a bit and has turned out not as easy as it seemed. Besides, I had to overcome my fear of not having control of how I slide on skis (no matter how slow my motion was). Over five days I grasped the basics of two styles and trained braking, the effects of which I still feel on backside. I fell over several times, but was fortunate not to have an injury. The next skiing experience is due next winter, I hope not to forget the skills learnt this year by then.

Investing in 2023

While filing my tax return on Thursday and claiming a sizeable refund (the effect of amending the Polski Ład reform in 2H2022 which retroactively decreased the PIT rate in the first bracket from 17% to 12%) I thought how to make the best use of money, other than spending it.

The current year does not seem to be easy for holders of pecuniary assets, since preserving purchasing power of money has become a challenge. Let’s look at the most popular alternatives at hand.

With the current real interest rate of -10% in Poland, bank deposits (whose quotations fell recently) still offer a solid alternative to putting money in a drawer, but even with expected disinflation, a real return in a few months is very likely to be negative anyway.

Poles are generally wary of fancy investments and therefore those who possess sizeable surpluses often turn them into tangible assets, i.e. residential properties. Between October 2021 and October 2022 mortgage instalments rose by around 100% and repayment capacities shrunk, hence the number of new mortgages granted was falling by nearly 70% year-on-year in 3Q2022. Property transaction prices only nudge up these days, but with inflation of over 17% (the January 2023 reading), value-wise they have produced a real negative return of 15% over the recent year. If prices stabilise in nominal terms over the next quarters, in real terms they will begin to be getting cheaper and cheaper. My forecast for this asset class (I dislike the term, since I believe properties should meet people’s housing needs rather than constitute a haven for their money) is not optimistic. With factors driving their prices potentially up and down in the near future, I believe the rent yield and price appreciation might be at the level of bank deposits, with higher risk and lower liquidity.

The equity market reached its low in Poland and on most markets in early October 2022. It seems at that time stock prices already discounted all negative scenarios on the horizon, especially pertaining to problems with energy supply during the winter. I believe stocks might be a good, but if you purchase them on a temporary low. My strategy would be to wait for a correction and get some exposure to equities and if the correction gets deeper, buy more to bring down the average purchase price.

Government bonds seem to be a safe choice credit-wise, since most governments benefit from the inflation, as the real value of their debt shrinks. With the anticipated decrease in interest rates, fixed-coupon bonds might be a good mid-term investment, but mostly in terms of price appreciation, not the interest income. The yields on Polish 10Y gilts were quite volatile in recent weeks. Even in recent days the yield increased from 5.9% to 6.3%, which given the 10Y tenor must have resulted in a substantial loss in value.

For some foreign currencies are an alternative. Here it seems that Polish zloty is already weak against major currencies and little room for depreciation is imaginable. In practice the negative real interest, disturbingly low for a civilised world, might send the Polish currency even lower.

I have no idea about alternative investments, since I do not track them, but definitely must advise you not to jump into a train which has already departed. Chasing missed opportunities is one of major mistakes investors make. Stocks? You should have bought them in October 2022. Polish gilts – too. Inflation-linked bonds – you should have purchased them in 2021 at the latest. As a proud (of my skills) holder of those securities I do not believe they will continue to fetch extraordinarily good returns for more than a few quarters ahead. Or actually with the governor of the central bank who does not fulfil his duty to shield purchasing power of Zloty, those bonds might outperform bank deposits for 2 or 3 years.

Off for late-winter holiday next weekend. A coverage due on 12 March 2023.

In which I catch COVID-19

Nearly three years into the pandemic and having taken four doses of vaccine against COVID-19 (second booster on 24 October 2022) for a long time I kept escaping an infection. But if you live normally and take no other precautions that getting a jab, catching the virus is just a matter of time.

Saturday, 28 January 2023
I attend a housewarming party – over 30 people on mere 30 square metres. Mostly likely I got infected there. I am not sure, since the host claims no one reported being ill afterwards.

Thursday, 2 February 2023
I feel a bit off-colour. While attending my fitness / workout classes I get tired quite quickly, but I don’t find it disturbing.

Friday, 3 February 2023
I wake up with a fever (body temperature of +38C) which I bring down with a painkiller, then feel strangely – I have a weird headache, my stomach turns upside down, I feel dizzy. On that day a penny drops. On that day the number of confirmed infections in Poland is above 1,000 for the first time since October 2022.

Saturday, 4 February 2023
I feel quite weak, worn-down. Before leaving to my parents just in case I take a test. The outcome is positive. I repeat the test after 2 hours of not eating nor drinking and again it is positive.

Sunday, 5 February 2023
I visit a doctor, to find out my lungs are clear and my employer-paid healthcare plan does not cover testing. The doctor does not even ask if I need a sickie.

Monday, 6 February 2023
My weakness continues, I feel dizzy, but have no other symptoms. Needless to say my infection escapes official statistics.

Tuesday, 7 February 2023
I grow even weaker and work from bed most of the day. Those days I sleep 9 – 10 hours each night.

Wednesday, 8 February 2023
I think I am finally on the mend, despite testing positive in the morning. In the evening I go for a walk. I don’t get particularly tired, but feel dizzy again.

Thursday, 9 February 2023
I cannot judge whether I would have felt better, had I not worked for 11 hours. Apart from the “dizziness” which does not ease off, I recover.

Friday, 10 February 2023
Again I get tested positive. This gets slowly boring…

Saturday, 11 February 2023
Despite the ongoing infection I wear a mask, go to the shops, go the a museum for an exhibition. Nobody around cares if the virus is around, so why should I excessively care about other people. I hope to turn negative soon and to have no long-term complications after the infection.

Tribulations at work

For a while I have not shared many news from the corporate front, where the goings-on have been anything, but uneventful in recent months.

In September 2022 I was awarded a promotion. I had not held out for it, I had not strived for it, it came unbidden, although I perceive it as a well-deserved distinction. It involved a below-inflation pay rise, theoretically the same scope of duties, but in practice I am supposed to serve as consultant / advisor to less competent employees. That very change has not been a tremendous one.

In early December 2022 I learnt my manager with whom I had worked for 5 years would be promoted as of January 2023 and would be in charge of a newly created bureau. His promotion was well-earned too and I wished him all the best on the new career path, but on the other hand I regretted our paths parted for a while.

Also in December 2022 the vacancies we had had in our team and which generated additional workload were filled. Instead of hiring one senior analyst, somebody resolved to take on two absolute freshmen (graduates). I heard payroll of two junior analysts was lower than amount claimed by experienced professionals. Whether such savings pay off is debatable, since it takes much more time and effort before freshmen become value-generating staff.

In early January 2023 it transpired that the head of my department would go on a six-month sabbatical starting with the beginning of February. Actually it would not mean a great change, had it not been for a fact his responsibility for co-ordinating a multi-geography project on Poland level has been laid on me.

On 16 January 2023 my new manager had his first day at work. He is an experienced professional, open-minded, communicative, competent man and after three weeks I believe he is one of few outstanding bosses. In the meantime I have to assist him in finding his way around the new organisation, but this effort already pays off.

On the same day I became a mentor for the two freshmen, with a mission to bring them up into card-carrying credit analysts. So far my efforts go mostly down the drain. They lack basic knowledge SGH graduates should possess. This could be made up for with a bit of time and patience, but their brightness leaves a lot to be desired. They are determined to learn, but instead of comprehending causations, they attempt to memorise things, which does not bode them well as analysts. I have already shared my observations with our managers and at least they agreed after a probationary period some difficult decisions might need to be taken.

Under all the circumstances above, my workload is now a bit of excessive – my portfolio of clients is larger than of any other person in the department (and some of accounts are troublesome), I co-ordinate a project, I look after freshmen and help my boss. In return I have negotiated official overtime I register and will be paid for. In a short term, this makes sense and is equivalent to a 30% - 40% pay rise, but within a perspective of a few months I would definitely prefer not to work more than 45 hours a week and spend my off-work time in a more appealing way that doing overtime.

Historical shop receipts

While cleaning up the hard disk of my computer I have come across a spreadsheet dated 4Q2015 in which I recorded prices of basic goods in shops at that time, to estimate the costs of living after I move out from my parents. Over 7 years later, after a few quarters of rampant inflation, I possess a quaint material for price comparisons. The list is rather modest and contains household goods, food and beverages, so the main stuff which lands in a shopping bag.

A few basic articles whose prices have gone up significantly since 4Q2015:
- lavatory paper – bygone cost PLN 3.59 per 8 rolls, today – around PLN 10 for the same quantity,
- bath sponge – then PLN 0.63, these days PLN 1.29 at Lidl,
- milk (3.2%) – then below PLN 2.00 per litre, today usually above PLN 3.50,
- 10 eggs – then for less than PLN 4.00, today twice as much,
- a loaf of bread – then around PLN 2.00, today usually no less than PLN 3.00 (in a supermarket, in a bakery it is more expensive),
- flour (1 kg) – then around PLN 1.30, today at least two times more,
- sugar (1 kg) – then close to PLN 2.30, today I believe PLN 5.00 (I buy it once in a blue moon).

But to my surprise, I have found goods, whose price has not gone up significantly (if at all) over that time:
- glass cleaner – then PLN 6.00 per litre, today you might find it at such price at bargain sales,
- Domestos (1 litre) – then PLN 7.00, today you can find 750 ml for PLN 6.00,
- instant tea (100 bags) – then PLN 6.00, today no problem to find Earl Grey from Lidl at such price,
- oranges – then for around PLN 4.00 – PLN 5.00 per kg, recently I saw ones for PLN 3.49 in Lidl.

The above are just exceptions which prove the rule. The costs of living have gone up in recent months by more than the official inflation, with prices of nutrients and dwelling upkeep eating up only bigger parts of households’ budgets, which bears out inflation hits the poorest most. In December 2022 the average salary in Poland reached PLN 7,330 before tax, up by 10.3% year-on-year, while the CPI rate stood at 16.6%, which means real wages declined by 5.4% year-on-year. For the first time since many years Poles have been impoverished and the trend is likely to continue at least for a few months.

Personally, albeit I am faring well financially, I am going to set up a spreadsheet of my personal expenses and divide them into a matrix of four categories: essentials and non-essentials, vs. recurring and non-recurring. I will fill it in based on my bank account statements and jotted down cash payments at the end of each month and after 12 months (otherwise one-off expenses will not count up properly) I will find out how much I need to spend monthly to eke out a living and how much I actually spend. I estimate the former is between PLN 2,000 and PLN 2,500 (including car maintenance) and the latter between PLN 4,500 and PLN 5,000. I pledge revert with a summary in early 2024.

Dog ownership

As a child and as an adult I had not been fond of animals. At times I was tempted to adopt a cat, yet my allergy to cats put paid to those wishes. When being involved in charity, I always helped people and never donated money nor volunteered to animal shelters. Having something in common with pets was not my cup of tea.

Last summer I met a girl who has had a dog. Over the first weeks I was a bit of indifferent towards the creature, but with time, as she (the dog) began to treat me as a companion (and stopped barking on me fiercely every time I popped on to my girlfriend’s place), we (the dog and I) hit it off with each other.

My fondness grew, yet I was slightly afraid of looking after the pet. I first took her for a walk on my own in early October 2022 and recall I was slightly scared. A month later when my girlfriend and her parents flew to Turkey for holidays, the dog stayed with me for a week and I not only got on with it, but was elated to have a flatmate.

Having a dog is above all a duty. Taking it out for a walk three times a day is a must and it consumes between 60 and 90 minutes a day, which is a lot if you are in a rush, work-wise. Going to the office for 12 hours, as I tend to have to (more about recent developments on the corporate front soon), is also out of question. When the dog stays in my flat, I switch to home office only.

When taking a dog a for walk, picking up its turds is a must. I have quickly overcome the abhorrence, but I know for several people this down-to-earth element of looking after the dog is too difficult.

A bigger nuisance is cleaning the fur at home. In November it was no problem, but since early December the dog kept shedding her coat (which is not seasonal) and vacuum cleaning has become the order of the day.

I can tell you little about the costs, since so far all have been borne by my girlfriend, but I estimate all recurring (feed) and one-off (vet, vaccinations, toys) expenses count up to between PLN 500 and PLN 1,000 per month.

Upsides of having a dog friend who which brings joy to your home compensate the above with a surplus!

Wisła – the longest stay so far

A quick photo coverage of my foray to Wisła. I grabbed the opportunity of not having to pop in to the office during the theoretically slack period around Christmas and resided in the mountain resort for 10 days. One event I slightly regret as a zealous weather observer was missing out on experiencing the January heat record for Warsaw and the whole Poland (+18.9C on 1 January 2023). Where I was temperature in full sunshine barely climbed above +10C.

Higher into the mountains, remnants of snow lingered until the end of the 2022. During our trip to Trzy Kopce Wiślańskie on New Year’s Eve, we came across regular snow at 700 metres above sea level and such ice 100 metres higher. The dog was elated. We made it to the peak thanks to winter footwear we had worn.

On New Year’s Day we drove to Jaworzynka, a village close to a place where borders of Poland, Czech Republic and Slovakia converge. We hiked to the spot and to two other countries from the village, while other tourists had to carry their arses in their cars up to the venue. Twoje serce przypomina – piechotą zdrowiej. To the right – viaducts being a part of D3 motorway in Slovakia. I drove here in May 2018 not realising such valley was beneath the road.

A snap taken on the same day shows the undulating landscape of the Czech village Herczawa, which we later ambled through during our 11-kilometre hike. The weather was March-like and while we were ascending, two layers of clothing were absolutely sufficient.

The very tourist destination where the borders meet is in a state of reconstruc- tion. Instead of grass, mud is all around, presence of solar panels and wind turbines is notable. Sadly, cars in the background remind for many one mile is a far too long distance to cover on foot. Entry to such spots should be prohibited to visitors’ vehicles.

On 6 January we hiked to Stecówka. We cycled through part of that route in August, but this time we rambled up a shorter trail. To the right, a panorama from the viewing platform en route. In the fog one sees the confluence of Biała Wisełka and Czarna Wisełka. Where the two brooks join each other the river Wisła officially starts.

As we roamed downhill, we passed the winter residence of the president of Poland. Due to unfavourable skiing conditions (the weather resembled late autumn), Mr Duda was absent at that time.

As my girlfriend rightly claims, you should not stay in Wisła for too long, not to get accustomed to that place. After at most two weeks you should return to Warsaw to foster the longing for the place. For business (quite many tribulations at work) reasons I doubt I will visit the town in the coming weeks.

Pandemic diary – December 2022

Tuesday, 13 December 2022
The number of new infections is four-digit, for the first time since 26 October 2022. During the commencing winter a seasonal flu is probably going to be more dangerous than COVID-19.

Thursday, 15 December 2022
The 7-day average of new infections exceeds 500 for the first time since 5 November 2022. Forecasters claim the current wave, barely noticed by anybody, will peak in January, with on average 5,000 new infections per day.

Tuesday, 20 December 2022
China, upon lifting the zero-covid policy, is witnessing soaring numbers of infections, hospitalizations and infections which are not officially registered. The nation which used to keep the virus at bay for nearly 3 years and whose vaccines cannot boast of great efficacy, lacks proper immunity, which is the case for western societies these days.

Friday, 23 December 2022
It seems COVID-19 is now not the biggest peril to the health care system. This winter, as envisaged, the seasonal flu is taking its toll on Poles, especially on children. Par for the course after 2 years of masking and staying at home. Some time ago I was either somewhat ill or too busy to get vaccinated against flu. Currently, there is a shortage of vaccines in Medicover…

Thursday, 29 December 2022
I get my flu jab, but not in Warsaw, but in Bielsko-Biała.