As you walk along Eastcheap, London EC3 during business hours on any weekday, you need to be very careful. There’s an “A” framed advertising board which stands at the edge of the pavement opposite a barber’s shop. The message displayed on the board is a simple one “Gentleman, wet shaves by student barbers“. Now when it comes to someone else shaving you, it is certainly the one occasion when an old experienced hand commands a premium. In the words of Gordon Brown, “this is not a moment for novices“. So I, perhaps like many others, will be avoiding the delights of my personal early morning appointment with a student barber.
I suppose in any event the notion of the “wet shave” is a throw-back to Sweeney Todd, Demon Barber of Fleet Street. Perhaps modern barbers trace their roots back this far.
For business the modern day root can probably be traced back to 14 September 2008 when Lehman Brothers filed for bankruptcy in the New York Courts.
After some three and a half years, on 12 March Lehman Brothers emerged from this bankruptcy process. It’s sole business is now to distribute cash surpluses to creditors. The sums involved are not trivial as it is expected that by 17 April, $65 billion will be paid-out. This single act of an icon of the banking collapse moving on from the financial wreckage of the credit boom, seems to have done more to lift market sentiment than any number of bail-outs and austerity measures.
Since Lehman’s emerged from bankruptcy two significant events have occurred. First, the FTSE 100 has reached a peak last seen at the height of the dot.com boom in March 2000. Second the Federal Reserve in the US has announced that 15 banks have successfully passed a stress test. The result, those banks can now recommence dividend payouts. The good news in this direction was led by JP Morgan Chase which announced it would launch a share buy-back programme of up to $15 billion. With these US banks now in a position to return significant cash amounts to investors, not just this year but for years to come equity markets responded and pushed onto new highs. Some say this is the beginning of a 10 year bull market.
So, a good week indeed for Banks and bail-outs but not billboards.