…Is not a good combination of epithets for someone’s character. Following the collapse of Thomas Cook last week, a number of hoteliers begun to ask for temporary(?) tax cuts from their governments in various countries, as well as credit readjustments from their bankers. Effectively, they were trying to transfer their losses further down the chain.
Is that fair, I wonder?
One could argue that perhaps it would be fair for the bankers to also suffer part of the loss, since one would assume that they have enough manpower to adequately review their prospective clients’ financials before effectively investing into them via debt.
But the state? Why should the state give you a break for being lazy and greedy?
I remember a very well-know financier saying that “[…] the market doesn’t care if you have been a greedy idiot.” (He was referring to the losses incurred by Spanish banks in Turkey after the collapse of the TRY.) The principle should be exactly the same here: Some hoteliers relied way too extensively on a single supplier. It doesn’t take a financier to tell you that this is wrong, it’s just common sense.
I know of a partner in a big-4 firm here in Cyprus who lost tons of money during the haircut. He had the brilliant idea of increasing his deposits in the (now former) Laiki bank just a bit before it collapsed. He must have thought that the reason he received much higher than market interest rates on his deposits, was directly correlated to how handsome (he thought) he was. I can’t explain it otherwise. Another prime example of the “greedy idiot” principle.
Many people keep buying airline tickets from low-cost carriers because these are cheaper than the competition’s, even when the carrier is known to be at the brink of financial collapse. (Thomas Cook’s financial woes didn’t start overnight.) You know my opinion of (most of) these people right? But you know who isn’t a greedy idiot? The fuel companies, which are typically the first ones to cut credit to distressed carriers. (By the way, low-cost carriers do have a place in our society. They give the opportunity of travel to people who would otherwise couldn’t afford to do so as easily, like economic immigrants.)
And then, we have the case of market bubbles, where I typically support the “weaker” side. (Meaning the investors who lose their money, instead of the companies that take the money and turn it into ash.)
Why?
Well, here’s my argument (and conclusion to the whole “greedy idiot” principle): The people putting their money on the stock exchange out of excitement during booming times, aren’t necessarily knowledgeable of the workings of the market. And because none of us can be an expert in everything, I would expect that the state would have some form of protective rules, shielding the average investor from the abuses of the system. On the contrary, someone who is a professional and makes a business decision to pre-let their entire property to just one agent (that has already issued dozens of profit warnings no less), is supposed to be knowledgeable. This professional has consciously made the decision to put all their eggs in one very flimsy basket. Someone who moved capital inside a bank that was known to be in financial woes, has also consciously (whether they recognize it or not) taken a greater risk in exchange for greater reward. And so did someone who bought a cheap ticket from an airline that couldn’t even find a supplier willing to sell it jet fuel on credit.
You don’t have to be an expert in everything, and it is for this reason that the state should be doing its best to protect you from people that would take advantage of your ignorance on a subject. But to the extent that you are knowledgeably and willingly taking a risk by betting against the odds, I am sorry, but you know how I will brand you…