The ongoing global, banking, financial and credit crisis

"What happens to our financial services industry is important to our city, to the Province of Ontario and to Canada," says Jacoline Loewen, author or Money Magnet.
At their latest fiscal year-end, our five major banks had total assets of $2.5 trillion of which almost one trillion was outside of Canada.
In terms of market capitalization the five Canadian banks headquartered in Toronto all rank within the top 35 in the world.
So Toronto is an important banking centre and, if we play our cards right, it’s going to become more so. While Canadian banks have received some shocks from this crisis, on a relative basis they have done well.
Last year total write-offs by financial institutions around the world were in excess of $1 trillion and Canadian banks accounted for less than 1.4% of this total. Canadian banks are in a stronger position than what we see south of the border or in Europe.

Blackstone cashed out at the right time

FT.com says that

the listing of the private equity group could be the turning point in
financial history; one that will shape the world that emerges
from the current crisis: the moment when China really began to question its deep
financial entanglement with the US.

An interesting dilemma for both China and the U.S.: read here.
Jacoline Loewen, author of Money Magnet, says, "Blackstone cashed out at just the right time."
This article gives a glimpse of the dilemma facing both US and China with regard to their currencies and the management of growing debt on the US side versus the growing surplus on the Chinese side. The essence of this growing dilemma is highlighted in the following quote:
"US Treasuries are the safe haven; it is the only option," said Mr Luo. "Once you start issuing $1-$2 trillion . . . we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do."
Chinese investors are now the biggest foreign holders of US Treasuries with nearly $700bn. In total, foreign investors own about $3,000bn or more than half of all US Treasuries publicly available. The fact that the US is still somewhat considered the only true safe haven would explain why the US Dollar still remains relatively strong against all other major currencies. However, it also shows the precarious situation the US may face in the very near future. In order to continue to be able to find buyers for the growing US debt mountain, something has got to give. If the US$ were to depreciate, foreign investors would need to be incentivized with significantly higher yields on US treasuries.
Inflation will be a debtor's best friend and a creditor's worst nightmare.

Causes of the Crisis

I don’t think even today that we truly comprehend the incredible magnitude of what has happened, and what is happening, to the global banking and financial business.
With so much government involvement and government ownership of big banks in both the U.S. and the U.K., we won’t know the full impact of all of this for a decade.
The stock market impact has been significant.
- the Standard & Poor’s diversified bank stock index is down 72%
- the financial index is down 76% and
- the insurance composite index is down 72%
The TSX Bank Stock Index is only down 50% - isn’t that wonderful – (we have outperformed).
I am not going to dwell on the causes of this crisis because they have been extensively and well covered in the press.
They include;
- Major public policy failure in the U.S. in the housing area.
- Far too low interest rates and easy credit under Alan Greenspan.
- Failed financial innovation on a massive scale.
- Almost complete regulatory failure in the U.S., U.K. and Europe – it was the age of deregulation.
- Total rating agency failure - - for the tenth time and
- Finally, too much leverage everywhere you look.
You could write a book on each of the above but I think Money Magnet - my latest book - will be one to help business owners understand how to access new money now that the banks are being restructured.

Succession Planning Family Business is a Nightmare on Elm Street

Our guest blogger is Tom Deans author of Every Family's Business.

If so many jobs, so much wealth wasn't collateral damage when a family business is gifted, watching them pass to the next generation would continue for some to be the best theatre ticket in town.
But lenders and their shareholders aren't laughing as the single largest generational transfer of wealth begins in less than ideal economic circumstances.
If the questions that a family can ask themselves to protect their wealth weren't so simple, the impending destruction of so much wealth wouldn't be so sad.
On this point there is no debate -- at least not for me. Having watched three generations of my family start and sell their businesses instead of gifting them, the next generation has always been free to pursue their own great big idea.

Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com

Does a Family Business Mess up the Next Generation?

Our guest blogger is Tom Deans, Author of Every Family's Business.

Founders who gaze upward and utter the phrase "(insert company name) will always be family owned" are either delusional, narcissistic, or neither and just really get a charge out of messing with the heads of their children who lust for stuff -- free stuff.
I think most founders know that the businesses they gift are anything but easy to receive --are anything but easy to operate and sell.
The founders who gift businesses may indeed dish out what junior really deserves.
The profile of the spendthrift child with no discernible work ethic is well documented in popular culture and usually on display in Toronto at the Four Seasons in Yorkville most afternoons.

Tom Deans, Author, Every Family's Business: 12 Common Sense Questions to Protect Your Wealth. www.ProtectingFamilyBusinessWealth.com