The winner takes it all, God 'Elp All Of Us

It's the World Economic Forum in Davos this week. For that occasion Oxfam issued a publication titled 'Working for the Few'. This is the picture that goes with it:

If that doesn't make you stop and think, how about this:

• Almost half of the world’s wealth is now owned by just one percent of the population.

And

• Seven out of ten people live in countries where economic inequality has increased in the last 30 years.

You can read all about it here.
With growing inequality putting more and more stress on the social fabric that holds nations together, this does not bode well for our collective future.

One more statistic from Davos: Chinese investment in the UK in the past 18 months was equal to that of the previous 30 years.

For some reason this week there were some human interest articles about 100 years of commercial aviation. I say 'for some reason' because the first scheduled flight happened on January 1 1914, so our dear journo's are lagging about 20 days behind. That first flight was between  St Petersburg and Tampa in Florida and was operated by SPT Airboat Line. Airboat because the aircraft operating the route was a Benoist Type XIV. It made me think back to those exciting pioneering days of aviation and about the legendary flights of the Vickers Vimy. It was the first airplane that made a successful transatlantic crossing (June 15, 1919). John Alcock and Arthur-Written-Brown were the pilots. After having crossed the Atlantic John Alcock said "Yesterday I was in America... and I am the first man in Europe to say that." Statements like that make my world stop for a moment!

Later that same year the Vimy (registration G-EAO God 'Elp All Of Us) also flew from London to Adelaide. They left Hounslow Heath (now Heathrow) on November 12 1919 and reached Darwin on December 10, 1919. They continued on to Adelaide the home town of the Smith brother's (the pilots). If that ain't adventure, nothing is.

I saw a replica of the Vimy at Farnborough in 1996. The replica repeated the 1919 flight in 1994. Again quite an accomplishment! There is a magnificent book about the 1994 journey of which I have a copy signed by Peter McMillan one of the two pilots (the other one was Lang Kidby).

Vicker Vimy G-EAOU  Farnborough 1996

Vicker Vimy G-EAOU  Farnborough 1996

Vicker Vimy G-EAOU  Farnborough 1996

Do not repeat stupidity and centre of gravity

When you do something stupid and hurt yourself in the process, you tend to learn the lesson and not to repeat the stupidity any more. When we all dived into the 2008 financial crisis, the lesson learned (amongst others) was: too much derivatives on the banks balances and not enough capital to guarantee losses on their (derivative) investments. Basel III (the rules devised by the Basel Committee (composed of central banks and chaired by Mario Draghi)) was supposed to solve this. They adopted the international standard for the leverage ratio* on January 12. Without going into the technical details, here is what you should know about it (but only very few media have reported upon):

• it eases the requirements for products, such as derivatives, which make up large parts of the banks' balance sheets
• according to Financial Times sources, the effect of the adjustments could be a raise of big global banks’ average leverage ratio from about 3,8% to just over 4% -> This means that the Basel fiddling on how to count derivatives gives the banks a free 0,2% leverage ratio avoiding a capital increase of billions of $ or €.
• entry into force is only 2018, and the minimum required ratio is still not defined. Basel has proposed a minimum of 3%, but the US wants to strengthen this (higher %). Europe is lobbying to stay with the 3%. Go figure...

You want to have it crystal clear? Here's a quote from an analyst at BNP Paribas, who said the result was “more of a win for the industry than I was expecting”.

As a result of the Basel III agreement bank stocks went up 2-3% on Monday.

Lessons learned? None. At least we and our politicians have not learned any. The banks on the other hand have learned an important lesson: We (the banks) can gamble the global financial system, be bailed out with public money if it goes wrong, not be punished for it and even better, can start all over again playing the same game.


Often I get the impression that many of us who live in the Western world still haven't grasped that the centre of gravity on economic, political, hey on every level (except for earth's centre of gravity) has shifted to the East. This picture courtesy of the Worldbank should give those who believe they are (still) the centre of the world  something to reflect upon. More people live in the highlighted area than outside of it.

Worldbank - More people live inside this circle than outside of it.

* From the Basel website: The leverage ratio "promotes the short-term resilience of a bank's liquidity  risk profile. It does this by ensuring that a bank has an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash easily and immediately in private markets to meet its liquidity needs for a 30 calendar day liquidity stress scenario."

Five ways to have a great day, Joey on the way out and why worry

There is a bit of Taleb-bashing going on on the net (claims that he made wrong predictions about going short on US Treasuries as long as Bernanke is in office; he did make those predictions, and indeed you would have hardly made any money on it, but those criticising him didn't understand Taleb's investing strategy). Anyway, it's not up to me to defend the guy, he does a pretty good job of that himself. However as a token of support and because it is time for New Year resolutions anyway, here's a list offered by Taleb of five ways to have a great day:

1. Smile at a stranger,
2. Surprise someone by saying something unexpectedly nice,
3. Give some genuine attention to an elderly,
4. Invite someone who doesn’t have many friends for coffee,
5. Humiliate an economist, publicly, or create deep anxiety inside a Harvard professor.

I read on some aviation news websites that Aurigny Air Services (the carrier operating from the Channel Islands) is considering the Dornier 228 as a replacement for their Britten Norman Trislander. No no no no no! I mean, yes I can understand their rationale for wanting to do this but it would make me so sad to see the Trislander disappear. Those of you who don't know the airplane, it is a development of the Islander (a picture is included here). Only 72 were built in the seventies but they saw operations across the globe (and often in exotic places). The Trislander is longer than the Islander but its most prominent feature is the 3rd engine (turboprop!) in the fin.

In the Channel Islands the Trislander is affectionately referred to as Joey. As I will be there for holiday this year, I at least need to get some pictures of it. For now I only can share a drawing which I made a couple of decades ago.

Phil Everly of the Everly Brothers died last week on January 3rd. The most harmonious voices in music history are no longer. Their music lives on so does their influence. When the news broke of Phil's death, following live performance from 1986 was referred to often as a tribute. So let's listen to The Everly Brothers with Chet Atkins, Mark Knopfler & Michael McDonald - Why Worry

That's fiction, we are doing jolly well and all too real wing walking

The dark days between Christmas and New Year are a great time to do some reading. So I embarked on a heavy book (literally and figuratively) titled 'Breaking the code of history'. A beautifully glossy publication written by an interesting guy. Dyslectic as a child David Murrin studied physics and became a geophysicist. He spent two years in Papua New Guinea searching for oil in the jungle where he had interesting encounters with local tribes. He then ended up at the London stock exchange on behalf of JP Morgan. Those of you who wonder about that career switch should know that in those days, banks were on the lookout for mathematicians and physicists to calculate the best way how to trade. The author also has a life long interest in history. And all of that background is felt throughout the book. The first 370 pages (yes...) are a walk through history using numerous examples to prove the author's premise on how empires rise and fall. Empires on large and small scales (he saw the same dynamics in the jungle tribes, the stock exchange, countries, nations and our whole planet and he draws a parallel with fractals). The second part of the book he looks into the future and gives us some predictions on what could happen. This is interesting because the book is from 2010 so 3 years on, one can already get a feeling on how right or wrong he is. Without giving you any spoilers, let's just say that my scepticism grew whilst I was progressing through the book. First of all, he only remotely touches upon the influence of new technology on our future and he barely takes new social structures (through social media) into account. But what really threw me is that he applied basic mathematical principles to social science. His basic premise of rises and falls of empires is represented by a gaussian curve. That is of course utter nonsense because it is a fact that gaussian mathematics work perfectly in physics but are completely useless and wrong when they are applied to social science and economy. So I had an interesting read but believe the whole theory is based on one big flaw. Maybe the author sees himself as a Hari Seldon, the 'hero' in Isaac Asimov's foundation trilogy who calculated to the second the rises and falls of empires for millennia to come. That is fiction of course and it will remain so.

We had some good year wishes from our European President Herman Van Rompuy who said that the crisis is behind us (what else would you expect him saying with European elections in 5 months where anti-European parties may gain a lot of ground?). Mario Draghi almost immediately responded that although the crisis is less acute a lot of work still needs to be done for things to really settle down (he means: politicians you have done nothing with the time I bought for you!). As illustration a graph from @komileva showing the debt as a % of GDP comparing 2010 to 2014 (based on the IMF Oct forecast). We are doing jolly well...

I came across an intriguing picture whilst I was strolling twitter and did some research. Yes that is a man standing on a DC-8 taking the art of wing-walking to a whole new level.

Rick Rojatt – The Human Fly did this in 1976 when he mounted himself atop a Douglas DC-8 and was flown at speeds in excess of 280 mph at 5000ft (watch the full 23 min movie here). Wing walking has been (almost) as old as aviation itself and you can still see it at airshows. There is a British team (here's the website - different colour scheme today) who does the Summer airshow circuit. I saw them a couple of years ago at Beauvechain (EBBE). Not DC-8s but Boeing Stearmans and impressive nevertheless! (Yes the lady is really wing-walking in the second picture, have a close look in between the wings.)

Happy New Year!

An open invitation to risk my money, justice exists and aerobatics

This is it. I have warned about it a couple of times but now it's agreed: bail-ins will be possible as of 2016. The eurogroup finance ministers adopted a new "Bank recovery and resolution directive" that puts your savings at risk when your bank goes belly-up. What are the rules? Pretty simple:

• First the shareholders have to cough up. They have to take a minimum of 8% of the banks losses.
• Savings are guaranteed until 100000,- €, anything above that is up for grabs.
• Every member state has to establish within 10 years a 'resolution fund' that has to reach 1% of all deposits covered. All banks have to contribute to this fund.

Before you start applauding a couple of small remarks:

• The 8% minimum coverage of bank losses by shareholders will quickly become a maximum when the dirt hits the fan. Shareholders will argue that they only have to cover 8% of the losses before savings above 100000,-€ can be shaved. With many governments now shareholder of banks, I expect they will also argue this way.
• It is noteworthy that there is no cap above 100000,-€. In other words, you don't risk loosing a part of what you have saved above 100000,-€, no you risk loosing everything above 100000,-.
• There is no differentiation between a personal saving account or an account of a small or medium enterprise. They too will suffer the same fate.
• That 'resolution fund' only needs to be established within 10 years. I would surely hope that we are out of the woods by then! What happens in the mean time (if bank goes bust and no 'resolution fund' available yet) does not bode well for our savings.
• A 1% 'resolution fund' is not going to resolve anything if a big bank is in trouble. A quick calculation: in Belgium there is about 250 billion € on saving accounts. That means the fund will have to be at least 2,5 billion € big. This is peanuts if one of the bigger banks goes bankrupt as they hold tens of billions of € in savings! And it'll be interesting to see how banks can be convinced to depart from 2,5 billion €.
• A lot of that 250 billion € is on Belgian saving accounts but from foreign banks (example PNB Paribas, a French bank, that took over Fortis). So the Belgian fund has to guarantee savings deposited at and controlled by a foreign bank over which it has no control. Am I the only one who sees this as an open invitation for foreign banks to take risks with money collected abroad?

Justice exists in the financial world... but you have to go to Iceland for it. Those at the helm of the Icelandic Kaupthing Bank that threw the whole country into the abyss got sentenced to 5 years of imprisonment. The rest of the world could learn an important lesson from this.


One of my friends started his own company called AURTE: Aerobatic & Upset Recovery Training Europe. Anyone who followed civil aviation and pilot training discussions over the past years, knows there is an issue with degrading manual flying skills. So this new start-up is very welcome. But it made my heart beat faster for another reason. They are using a Corvus Fusion. Ultralight adepts (like me) know what this means: a fast aerobatic ultralight. Watch how they take it through its paces. In summary: I want one!!!

I heard you Barack, forget Nature and colour schemes

When world leaders gather at a funeral I always get a feeling of unease. Maybe I am just too sceptical but I can't help wonder if they attend because they want to pay their respect to the deceased or because they want to bask in the shine and glory the deceased has left. Looking at how respectful world leaders were by posting selfies on twitter during Mandela's memorial service I get the impression they are there for the second reason, not for the first.
Also it is striking that in all speeches I heard during the service not a single one apologised to Mandela and the South Africans. Apologise? Yes indeed apologise. UK and US supported Apartheid until just before Mandela was released. CIA helped jail Mandela  in 1962. UK and US put Mandela on their terrorist list. The US kept him on the terrorist list until 2008!
Also I heard Obama say following:
"There are too many of us who happily embrace Madiba's legacy of racial reconciliation, but passionately resist even modest reforms that would challenge chronic poverty and growing inequality.
There are too many leaders who claim solidarity with Madiba's struggle for freedom, but do not tolerate dissent from their own people. And there are too many of us who stand on the sidelines, comfortable in complacency or cynicism when our voices must be heard."

I heard you Barack. You want a place in history books? Then go and really do what you preach and maybe the world will become a better place in some parts of the world.

In the mean time lets listen to N'Kosi Sikeleli, South African's national anthem in a a-typical but very good and powerful version by Perpetuum Jazzile:

The Nobel price winners received their price on the same day as the Mandela memorial so that news got a bit snowed under. There is one article that I recommend reading because Randy Schekman (winner of the Nobel price for medicine) declared he will no longer send papers to the top scientific magazines. Why? Because: "Leading academic journals are distorting the scientific process and represent a "tyranny" that must be broken. Schekman said pressure to publish in "luxury" journals encouraged researchers to cut corners and pursue trendy fields of science instead of doing more important work. The problem was exacerbated, he said, by editors who were not active scientists but professionals who favoured studies that were likely to make a splash."
You can read the full article here.

Talking to a pilot this week, he told me he got on an Alpha Jet flight. Blimey! I would love to have a go as well. It reminded me of the lively colour schemes that our Belgian Airforce came up with every year before the start of the airshow season. Ok, granted, not all were works of art, but colourful they were. Below a selection of the schemes between 1989 and 1994.

The best Belgian colourscheme ever was not on an Alpha Jet but on a Belgian Air Force Mirage V. I shot below picture in Bierset (then still partly a military airfield) of BR15 in the celebration scheme for 70 Years of the 42nd Squadron Mephisto. What a beauty!

The big picture²

I took half a day off this week to join a speech from Barry Ritholtz. Those of you who don’t know him, Barry is world renowned in the economic and financial world. He has his own wealth management company, is a regular guest on Bloomberg tv and his blog (the big picture) is ranked by TED amongst the top 100 sites one has to know and it has more daily pageviews than USA Today.

So when I received an invitation to attend his speech I immediately put in my request for half a day off.

Now Barry threw a lot of interesting graphs at his audience but the one thing that made me think was something he said. In the late 19th century companies were laying down a complete railroad network across the States. These companies struggled for survival because of the high cost of the endeavour but everyone wanted to invest because the future was here. Until it all went ‘pop’, the bubble burst, companies went bankrupt and the infrastructure was bought up by others for pennies on the dollar. The buyers made a fortune as they had in their hands the basic infrastructure at a very cheap price upon which a whole new economy developed. Fast forward to the turn of the 20th century and companies were laying down fibreoptic cables across the country. A very high investment (100s of dollars cost per mile) but everyone wanted to invest because the future was here. Until it all went ‘pop’, the bubble burst, companies went bankrupt and the infrastructure was bought up by others for pennies on the dollar. The buyers made a fortune as they had in their hands the basic infrastructure at a very cheap price upon which a whole new economy developed (e-commerce, social networking, ...). Fast forward another decade. Debt was build up and everyone was out for a loan because investment was plentiful and a sure bet. Until it all went ‘pop’, the bubble burst, companies went bankrupt and ... Nothing. Here is the difference between the current crisis and the above big crisis. The railroad and fibreoptic crisis gave us, after the bubble burst, infrastructure at low cost upon which a new economy developed. When the bubble burst in 2008 it left us with debt. Conclusion: it will take a lot longer to recover from this crisis.

What made me wonder is where the next ‘useful’ bubble is. ‘Useful’ meaning giving us something to build on at low price. If I knew I would be in for some serious money making but I don’t know. However I am just wondering if green energy is not a good candidate. Windmill parks, solar parks, ... are developed with a lot of incentives and government support. Once this support falls away (due to austerity cuts), these new energy parks seem to run into trouble as they have too much debt and without the incentives, too few revenue to pay off the debt. So, if these go belly-up, the interesting bits will be up for sale at a cheap price. To those of you with deeper pockets than me, maybe this is worthwhile reflecting upon.


Off to space! This week China sent a lunar rover to the moon and SpaceX (from Elon Musk) put its first satellite into orbit. I include two pictures posted by Elon Musk on his twitter account.

Fascinating as it all is, it is dwarfed by these breathtaking pictures from Cassini. Talking about a big picture, they rarely come more beautiful than these! No one understands how that hexagon was formed on Saturn’s north pole. Researchers are running all kind of hypothesis to get a grip on it. Nature is wonderful isn’t it.