Thursday, September 16, 2010

When In Doubt, Always Bet on the Greedy Bankers


Sometimes I just don't know whether to laugh or cry.

Deutsche Bank is one of the world's top ten investment firms. Among these ten, it ranks sixth in terms of revenue. However, significant to this post, it is a leader in terms of net earnings on revenue. In 2009, Deutsche Bank earned almost 5 billion dollars on 25 billion in revenue (20%). Only Barclays, at 30%, did better. Morgan Stanley came in at 8%. Chase earned around 12 billion - but on over a 100 billion in revenue.

So you get the impression that among huge, international investment banks, Deutsche Bank is not only one of the largest, but also one of the best managed. As a matter of fact, all things being equal, if you had invested $10,000.00 with Deutsche Bank last year, you would have come away with a cool $2,500.00 in earnings. By contrast, the same amount invested with Bank of America would have netted you a whopping $521.00. Don't spend it all in one place buddy.

Now I'm going to make a wild guess here. Most of the big shots at Deutsche Bank probably don't know astrophysics from apple butter. When they were back in high school during science class, while most of the science wonks were up front scoring points on relativity, they were the ones at the back pulling wings off flies and dreaming of the day they would be gobbling up municipal bonds and underwriting mortgages.

But now that they find themselves in charge of billions in investment assets, things have changed. New discoveries in science and technology can often have a nasty habit of radically affecting investment strategies. Take climate change for example. As you have probably heard by now, a near unanimous consensus of climate scientists concur on the potential effects of anthropocentric global warming. Of course, these effects sound pretty alarming. But if you're running one of the world's largest investment banks, you need to find out - and quickly - first, if any of this stuff is actually true, and second, if it is, what do you do about it?

Happily, the big wheels at Deutsche Bank don't have to go back to school and learn all the stuff they ignored while they were cleaning up on 50% interest loans to their classmates. All they have to do now is hire the science nerds who took the time to do their homework and have them figure it all out.

And that's just exactly what they did. Three years ago, Deutsche Bank established a whole division, DB Climate Change Advisors, (DBCCA) to study the problem and come up with answers. From that site:

"Three years ago, Deutsche Asset Management identified climate change as one of the mega-trends that would drive the global asset management business for the next generation and beyond. We saw that the rapidly growing level of carbon in the atmosphere meant that the world had to take action now, and that this would require massive capital investment over several decades. That in turn would produce exciting new investment opportunities from which our clients could benefit."

Just a couple of weeks ago, as a service to its investors, DBCCA released a report: Climate Change: Addressing the Major Skeptic Arguments. Interestingly, that report addresses just about every major denialist claim you and I have talked about here - and debunks them all in short, lucid, and absolutely devastating language. I won't post excerpts here. The report is only 51 pages long anyway and should take you only a few minutes to leaf through.

But I will post excerpts from an August article from Reuters, "Deutsche Bank spurns U.S. for climate investment.":

" "You just throw your hands up and say ... we're going to take our money elsewhere," said Kevin Parker in an interview with Reuters.

Parker, who is global head of the Frankfurt-based bank's Deutsche Asset Management Division, oversees nearly $700 billion in funds that devote $6 billion to $7 billion to climate change products.

Amid so much political uncertainty in the United States, Parker said Deutsche Bank will focus its "green" investment dollars more and more on opportunities in China and Western Europe, where it sees governments providing a more positive environment.

"They're asleep at the wheel on climate change, asleep at the wheel on job growth, asleep at the wheel on this industrial revolution taking place in the energy industry," Parker said of Washington's inability to seal a climate-change program and other alternative energy incentives into place..."

"The U.S. hasn't even entered the race yet" for a clean-energy economy, Parker said. Indicative of that was the fact that of the nearly $7 billion in green investments his fund currently juggles, only about $45 million originated in the United States, according to Deutsche Bank." (my emphasis)

Whoa! Wait a minute here. Deutsche Bank isn't a bunch of wild eyed environmentalists out to save the spotted woodpecker. All these dudes care about is making money - and if a few woodpeckers drop dead in the process I doubt they would even notice.

Steve, I think I need to say that again in a different way. All Republicans running for the Senate, and nearly all Republicans running for the House, have denied the legitimate findings of science and oppose any action of any kind to regulate the emission of greenhouse gasses or actively promote an environment favorable to investments in renewable energy. And, if the polls are anywhere near reliable, these are the kind of people we will be electing this November.

Deutsche Bank, a sharp investor with a track record to prove it, has seen the handwriting on the wall. These mopes running for congress didn't even bother to look at it. Which would you bet on?


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