Great Financial Crisis

E@L was meticulous with a pirate version of Microsoft Money, entering each transaction from his credit card statements diligently at the end of each month.

The $7 thousand (AUD) debt on his credit cards was gone, cleared in three months. He was in the black for the first time in twenty years. He wanted to keep an eye on this transformation. The salary kept rolling in, all income tax deferred till the end of the financial year in March/April when he would have to pay for two years, this one and provisional tax for the next.

"Your Assets Over Time" was his favorite graph. Month after month the bars climbed steadily until it crashed through five figures (HKD), six figures, and just eighteen months after moving to Hong Kong, and even after paying two years tax (pro rata, at about 7%), seven figures.
E@L was meticulous with a pirate version of Microsoft Money, entering every transaction from his credit card statements diligently at the end of each month.

The seven thousand dollars (AUD) debt on his credit cards was gone, cleared in three months. He was in the black for the first time in twenty years. He wanted to keep an eye on this transformation. The salary kept rolling in, all income tax deferred till the end of the financial year in March/April when he would have to pay for this one year (pro-rata) and provisional tax for the next.

"Your Assets Over Time" was his favorite graph. Month after month the bars climbed steadily until the most recent one crashed through five figures (HKD), then through six figures, and just eighteen months after moving to Hong Kong, and even after paying tax, even seven figures.

~~~~~~~~~~~

E@L's money was "not working for him" it seemed. Malcolm scratched at the small patch of psoriasis at the edge of his moustache, shrugged and smiled. He picked up his cup, sipped at his tea, and then clattered the cup back onto its saucer. The Mouse appeared behind Malcolm with a plate of Anzac biscuits from the kitchen and she placed it on the table between E@L and his financial advisor. "Oh!" he jumped, startled by The Mouse's magical appearance [it's not just E@L that she spooks]. "No thanks," he said as he looked around to where she had just been standing. The kitchen door closed and he turned back to face E@L.

"Have a look at this." He unbuckled the strap of his brief-case [brown, soft leather, weathered, but well looked after - nice, but appropriately reassuring for a finance guy?] and took out a shiny prospectus folder. He placed the bag down beside his chair and opened the folder on table, moving the cup and saucer away to make room. He spun the folder around easily on the polished table-top and slid it closer E@L, and this knocked a biscuit from the plate. Absently Malcolm took up the disturbed biscuit [name for a band?] and nibbled as he pointed out colour-coded items on the page uppermost in the folder.

"It's called a leveraged loan. We take a certain amount of your money, right?" E@L nodded. "The Royal Bank Of Scotland will lend us 150% of that sum at 4%, OK?" E@L nodded, a bit more slowly. "That gives us 250% of your initial sum. We have 'leveraged' your money so that we have more. You with me?"

E@L looked at him. "Why would they do that?" he asked.

Malcolm brushed a biscuit crumbs from his moustache. "Because, um, they would. It's an investment strategy for them. They're making 4%, right?" E@L nodded.

"We invest that loan into a managed fund, one that will give us a good return, at least, say, seven per cent, maybe even ten in this market." He smiled as he spoke this last phrase. E@L saw the dry skin on Malcolm's cheek, small white flakes of desquamation, inflamed tissues. Itchy? Market? "That way, we will have a differential of, say, three to six percent." Malcolm looked up from the chart smiling, and nodded. E@L nodded with him. "That's good right?"

"Yep," said E@L and smiled too.

"And when the fund matures, you have made a lot more than you could just by investing your money on its own." He looked at E@L who was looking at the colour print were it said '6%'. E@L wanted top get a coloured pencil and change it to an eight.

"Now, this fund is the one I recommend. It's a local one. This guy is good. Charles Schmidt. His last two funds made an average of 9% and 10% each year. I can't say this one will do as good, um... but it started last year, and we can still get in. OK, it will mature in five years. I've plugged some numbers in on the next page..."

~~~~~~~~~~~~

(Later that conversation)

"And so when it matures, I get to keep all the money, right?" E@L asked.

Malcolm paused as he brought another biscuit to his mouth. "Huh? Oh, yeah, all of it." He thought E@L was joking.

E@L thought Malcolm was joking. How could he turn $60,000 into $210,000 plus 6 per cent in five years? Talk about magic. But, hey whatever.

~~~~~~~~~~

(Later that year)

The advisor who had replaced Malcolm phoned E@L. His name was Simon, also a Brit. He wanted to set-up a meeting. When was a good time?

~~~~~~~~~~

"Well, Schmidt had been having a good time with your money, um... and that is not exactly what we anticipated." Simon nibbled on an Anzac biscuit nervously. E@L wondered if all financial advisors said "um" and if they all liked biscuits. He looked down on the papers, the coloured items encircled, the diminishing heights on the bar chart emphasized with scribbled arrows. E@L thought of his MS Money chart, afraid it was about to look similar.

"So?" asked E@L

"Well, in effect, you are losing the four per-cent on your E210,000 loan every year. That is, um... Look, I've run up some scenarios. As Malcolm probably told you [?! Malcolm? See above. No, he didn't!], there is quite a hefty penalty for exiting the loan in the first three years, so... Um... If we cash in now in order to pay off the loan, there is, um, also a penalty that the RBS have on this type of loan.. so we lose there as well. Are you OK?"

E@L had his head down, almost to the table. Then he looked up. "Did you say Euro? I thought this loan was in US dollars?" E@L asked.

"Um... Sorry, yes USD for the investment in Schmidt's fund, but the actual loan is in Euro. So with the dollar falling against the Euro, and with peg on the Hong Kong dollar of course, I mean that this is not really a great loan. I mean you can't predict the future... Um..." E@L nodded.

"So. What is my best option?"

Simon [... was it Simon? or a second E@L had no idea who this stranger was, in his apartment, sending a wrecking ball into his financial security] circled a few coloured numbers with blue pen, a bit clumsily E@L thought, but maybe that was because the papers were upside down to him. There was a buzz in E@L's ears, something was buzzing loudly.

"Here, and here..." he was saying poking his pen around some very large numbers, "so you can understand [E@L would have nodded but he was distracted by the grain in the wood of the table] that it's better to ride this out for a year, then have another look. If the dollar comes back against the Euro, you could lose a hell of a lot less. Maybe only 30 thousand."

Silence. Then E@L asked, "How much did I put in? 60 thousand?"

"Yes, 60 thousand, but if you wait, stick for even three more years, the early repayment penalty drops, right? You will lose even less again."

~~~~~~~~~~

(Later that day)

E@L held the cold cup of tea in one hand. He looked over the wall of his roof-top, across the park to the weird skyscrapers in the financial centre of Hong Kong. Fucking big buildings. HSBC. BoC. Which one was RBS?

He lent over the wall and looked down to the abandoned construction site. Only four floors on the other side, the entrance, but maybe seven floors on this down-side of the hill. He tipped the last of the tea over the side, watched the lightly coloured liquid turn to spray until it fell out of his focal zone on the descent towards a pile of building rubbish.

Aware suddenly of a presence next to him, he started.

"Mr E@L, do you want another cup of tea?" asked a soft, almost inaudible, voice. E@L turned around and there was a fresh cup of tea and a plate of Anzac biscuits on his picnic table. The Mouse was gone.

E@L

~~~~~~~~~~~

E@L's money was "not working for him" it seemed. Malcolm scratched at the small patch of psoriasis at the edge of his moustache, shrugged and smiled. He picked up his cup, sipped at his tea, and then clattered the cup back onto its saucer. The Mouse appeared behind Malcolm with a plate of Anzac biscuits from the kitchen and she placed it on the table between E@L and his financial advisor. "Oh!" he jumped, startled by The Mouse's magical appearance [it's not just E@L that she spooks]. "No thanks," he said as he looked around to where she had just been standing. The kitchen door closed and he turned back to face E@L.

"Have a look at this." He unbuckled the strap of his brief-case [brown, soft leather, weathered, but well looked after - nice, but appropriately reassuring for a finance guy?] and took out a shiny prospectus folder. He placed the bag down beside his chair and opened the folder on table, moving the cup and saucer away to make room. He spun the folder around easily on the polished table-top and slid it closer E@L, and this knocked a biscuit from the plate. Absently Malcolm took up the disturbed biscuit [name for a band?] and nibbled as he pointed out colour-coded items on the page uppermost in the folder.

"It's called a leveraged loan. We take a certain amount of your money, right?" E@L nodded. "The Royal Bank Of Scotland will lend us 150% of that sum at 4%, OK?" E@L nodded, a bit more slowly. "That gives us 250% of your initial sum. We have 'leveraged' your money so that we have more. You with me?"

E@L looked at him. "Why would they do that?" he asked.

Malcolm brushed a biscuit crumbs from his moustache. "Because, um, they would. It's an investment strategy for them. They're making 4%, right?" E@L nodded.

"We invest that loan into a managed fund, one that will give us a good return, at least, say, seven per cent, maybe even ten in this market." He smiled as he spoke this last phrase. E@L saw the dry skin on Malcolm's cheek, small white flakes of desquamation, inflamed tissues. Market? "That way, we will have a differential of, say, three to six percent." Malcolm looked up from the chart smiling, and nodded. E@L nodded with him. "That's good right?"

"Yep," said E@L and smiled too.

"And when the fund matures, over say five years, you have made a lot more than you could just by investing your money on its own." He looked at E@L who was looking at the colour print were it said '6%'. E@L wanted top get a coloured pencil and change it to an eight.

"Now, this fund is the one I recommend. It's a local one. This guy is good. Charles Schmidt. His last two funds made an average of 9% and 10% each year. I can't say this one will do as good, um... but it started last year, and we can still get in. OK, it will mature in five years. I've plugged some numbers in on the next page..."

(Later

"And so when it matures, I get to keep all the money, right?" E@L asked.

Malcolm paused as he brought another biscuit to his mouth. "Huh? Oh, yeah, all of it." He thought E@L was joking.

E@L thought Malcolm was joking. How could he turn $60,000 into $210,000 plus 6 per cent in five years? Talk about magic. But, hey whatever.

~~~~~~~~~~

The advisor who had replaced Malcolm phoned E@L. His name was Simon, also a Brit. He wanted to set-up a meeting. When was a good time?

~~~~~~~~~~

"Well, Schmidt had been having a good time with your money, um... and that is not exactly what we anticipated." Simon nibbled on an Anzac biscuit nervously. E@L wondered if all financial advisors said "um" and if they all liked biscuits. He looked down on the papers, the coloured items encircled, the diminishing heights on the bar chart emphasized with scribbled arrows. E@L thought of his MS Money chart, afraid it was about to look similar.

"So?" asked E@L

"Well, in effect, you are losing the four per-cent on your E210,000 loan every year. That is, um... Look, I've run up some scenarios. As Malcolm probably told you [?! Malcolm? See above. No, he didn't!], there is quite a hefty penalty for exiting the loan in the first three years, so... Um... If we cash in now in order to pay off the loan, there is, um, also a penalty that the RBS have on this type of loan.. so we lose there as well. Are you OK?"

E@L had his head down, almost ot the table. Then he looked up. "Did you say Euro? I thought this loan was in US dollars?" E@L asked.

"Um... Sorry, yes USD for the investment in Schmidt's fund, but the actual loan is in Euro. So with the dollar falling against the Euro, and with peg on the Hong Kong dollar of course, I mean that this is not really a great loan. I mean you can't predict the future... Um..." E@L nodded.

"So. What is my best option?"

Simon [... was it Simon? or a second E@L had no idea who this stranger was, in his apartment, sending a wrecking ball into his financial security] circled a few coloured numbers with blue pen, a bit clumsily E@L thought, but maybe that was because the papers were upside down to him. There was a buzz in E@L's ears, buzzing loudly.

"Here, and here..." he was saying poking his pen around some very large numbers, "so you can understand [E@L would have nodded but he was distracted by the grain in the wood of the table] that it's better to ride this out for a year, then have another look. If the dollar comes back against the Euro, you could lose a hell of a lot less. Maybe only 30 thousand."

Silence. Then E@L asked, "How much did I put in? 60 thousand?"

"Yes, 60 thousand, but if you wait, stick for even three more years, the early repayment penalty drops, right? You will lose even less again."

~~~~~~~~~~

(Later)

E@L held the cold cup of tea in one hand. He looked over the wall of his roof-top, across the park to the weird skyscrapers in the financial centre of Hong Kong. Fucking big buildings. HSBC. BoC. Which one was RBS?

He lent over the wall and looked down to the abandoned construction site. Only four floors on the other side, the entrance, but maybe seven floors on this down-side of the hill. He tipped the last of the tea over the side, watched the lightly coloured liquid turn to spray until it fell out of his focal zone on the descent towards a pile of building rubbish.

Aware suddenly of a presence next to him, he started.

"Mr E@L, do you want another cup of tea?" asked a soft, almost inaudible, voice. E@L turned around and there was a fresh cup of tea and a plate of Anzac biscuits on his picnic table. The Mouse was gone.

E@L