This Time it is Different

by | Jul 24, 2010 | Archives, DO NOT USE - MC

This time it is different. International business… global investing… our lives.

LifeStore - Banking - Insurance

See below how even in Smalltown USA… the smart money sees that life, business and investing will be different this time.

First, let’s go back to September 2006 when a small town Danish bank, (Jyske Bank started in a tiny farming community and became one of the second largest Danish banks) opened a totally new branch layout in all their branches.  To design this layout, they sent a team to the US to come up with new ideas, but did not look in banks. Instead they visited places like Barnes & Noble and Starbucks.

This was smart in my opinion because this time the banking business will be different. Then Jyske invested $72 million dollars in a renovation that gave them a great lead and eventually began to turn all commercial banking upside down.

Several years ago Jyske Bank changed its entire image… and the way its offices were run… looked… interfaced with its customer, because… they saw that this time it is different.

Jyske, Denmark’s second largest independent bank, underwent a major change. In just three months Jyske – pronounced Youska – Bank transformed all 125 of its branches – both physically, and from a business model perspective as well. Their goal: To make Jyske Bank Denmark’s most customer-oriented bank by introducing “Jyske Bank Generation Two,” a bold attempt to enhance customers’ experience and encourage them to change the way they think about banking. As part of this goal, they worked to make the bank less of an office for the employees and more of a comfortable, inviting, and informative environment for the customers.

The Coffee Bar Bank

One way they succeed with the “comfortable and inviting” goal is by hosting some of the most popular coffee bars in town.

In the first months after unveiling their newly designed branches to its 470,000 customers they served more than six tons of coffee. Each branch has its coffee bar near the front window, inviting passers by to pop in instead of rushing past.  But even though the free coffee draws a lot of attention, the bank’s profile is about more than just a good cup of java.  It’s about meaningful and helpful communication with customers as well as employees and management.

This is where the ‘informative’ part of the goal comes into play.  This is the Information Era so Jyske added an extensive use of A/V.

Jyske Bank
Many Jyske Bank branches, like this one, use multiple, large displays to inform and welcome passers by.

They improved information flow with 1,000 digital signage displays placed throughout the banks’ lobbies, and 500 interactive plasma displays in conference rooms.

Their deposits soared.

So I am impressed with Jyske’s ability to select good investments.  I was impressed by the way that Jyske survived the sub prime horrors (they were barely involved) and how they avoided Madoff.

I am especially impressed on Jyske’s continual search for value and by the fact that they are one of the few overseas banks that still accepts US investors.  For decades our newsletters and websites have warned about the gradual deterioration of the ability of Americans to bank abroad.

The US government has placed so may restrictions on what overseas banks must do to accept American clients that most overseas banks have simply closed their doors to Americans.

Now even some US banks are looking for ways to avoid Americans!

We can see this in an excerpt from last week’s USA Today article “Will financial firms go abroad to dodge overhaul?” by Paul Wiseman.

U.S. banks, hedge funds and other Wall Street firms are weighing whether to move more of their operations abroad now that Congress has toughened financial regulations at home.

“We’ve talked about it with a number of clients,” says Jeff Visithpanich, principal at Wall Street compensation adviser Johnson Associates. The new bill is creating “a large administrative hassle. … If you own a big hedge fund, there’s very little reason you need to be in New York or Greenwich (Conn.).”

President Obama is expected to sign the most sweeping overhaul of the nation’s financial system since the Great Depression on Wednesday. The bill is designed to prevent a repeat of the financial crisis of 2008 by cracking down on Wall Street excesses.

Once bankers have digested the 2,300-page legislation, the research firm CreditSights says, they are likely to conclude that the U.S. consumer market now offers “less attractive returns and that growth abroad is much more favorable.” (my bold).

In a recent report, CreditSights says Citigroup is in a good position “to deal with the brave new world” because it is already well-established in promising developing markets around the globe. It also noted that Wall Street icon JPMorgan Chase has dispatched top executives to review growth opportunities overseas.

Among the provisions that analysts say could send financial firms packing:

*The Volcker Rule, named for former Federal Reserve chief Paul Volcker, which prohibits banks from trading in financial markets for their own profit but not their clients’ and limits bank investments in hedge funds and private equity funds.

*Regulation of the shadowy market in over-the-counter derivatives, where Wall Street firms earned tens of billions in trading revenue and commissions. During the debate over financial reform, Sen. Richard Shelby, R-Ala., warned, “This bill will chase risky financial trades overseas and further into the unregulated shadow banking system.”

Under the legislation, banks also will have to set aside more capital as a cushion against loan losses, leaving less money available for loans and possibly driving corporate borrowers to foreign lenders, Bove says.

More on banking abroad in a in a moment.  First, let’s shift from Denmark to Ashe County, North Carolina and see how another financial institution sees that this time it really is different.

Last year AF Financial Group, the holding company for AF Bank, became LifeStore Financial Group.  The changes represent the seventh time that the bank has taken a new name since 1939 when the bank first set up its operation in the Parker Tie building.  The Parker Tie building still exists and houses Parker Tie Hardware.

I bought stain for our deck there last week.

The bank, Lifestore, however has moved on… a lot…  with seven branches, with its main presence in Ashe County.

Many of our neighbors think that the bank was crazy to change its name. Just as Jyske Bank was criticized by many when they made their changes in 2006.

Yet I see these shifts in Ashe County and in Denmark… by small town banks as a huge progression… a recognition that the days ahead will differ… a lot.

Bob Washburn, the president and chief executive of Lifestore, said of the change: The selection of LifeStore comes from what we really are. Banks are typically called branches and insurance offices are referred to as agencies, but we realize that we are truly a retail store for your life.

Let’s connect dots… to see trends in places as far apart as Copenhagen and West Jefferson. We can see that banking and finances will never be the same.

Take bank privacy as an example.  911 eradicated this. I saw the result this week when Merri and I had to make an emergency trip from North Carolina to Florida.  We drove straight through for 18 hours and next day when I went to buy more gas… my credit card would not work.  I have used this card for 18 years and always paid the total balance every month.   Merri called. “What’s up?” she asked.

We were told the largest credit card fraud in the US takes place at small gas stations.  My large purchase of gas in one day was outside my norm and the credit card company shut down my card for security reasons.   The security person told us every place and everything we had purchased the previous day and after asking some security questions…of course reopened the card.

We are lucky to be able to bank abroad at all!  This time it really is different which is why it is so interesting to be going to Copenhagen next month to speak at Jyske Bank Global Wealth seminar.

I would go even if I were not a speaker to hear the key note speaker, Kenneth Rogoff. who co authored the book “This Time It Is Different” with Carmen Reinhart.

Kenneth Rogoff and Carmen Reinhart at Ms. Reinhart’s Washington home. They started their book around 2003, years before the economy began to crumble.  (Photo by CATHERINE RAMPELL for the NYT.)

There is a great article about Rogoff and the book in the Sunday’s New York Times by Mary F. Calvert entitled “They Did Their Homework (800 Years of It).”
This article tells how Reinhart and Rogoff started their book around 2003, years before the economy began to crumble. The excerpt below shows why I am so interested in hearing what Rogoff has to say:  Like a pair of financial sleuths, Ms. Reinhart and her collaborator from Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen. Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.

The book, and Ms. Reinhart’s and Mr. Rogoff’s own professional journeys as economists, zero in on some of the broader shortcomings of their trade — thrown into harsh relief by economists’ widespread failure to anticipate or address the financial crisis that began in 2007.

Mr. Rogoff, 57, has spent a lifetime exploring places and ideas off the beaten track. Tall, thin and bespectacled, he grew up in Rochester. There, he attended a “tough inner-city school,” where his “true liberal parents” — a radiologist and a librarian — sent him so he would be exposed to students from a variety of social and economic classes.

He received a chess set for his 13th birthday, and he quickly discovered that he was something of a prodigy, a fact he decided to hide so he wouldn’t get beaten up in the lunchroom.

Soon, he began traveling alone to competitions around the United States, paying his way with his prize winnings. He earned the rank of American “master” by the age of 14, was a New York State Open champion and soon became a “senior master,” the highest national title.

When he was 16, he left home against his parents’ wishes to become a professional chess player in Europe. He enrolled fleetingly in high schools in London and Sarajevo, Yugoslavia, but rarely attended. “I wasn’t quite sure what I was supposed to be doing,” he recalls.

He spent the next 18 months or so wandering to competitions around Europe, supporting himself with winnings and by participating in exhibitions in which he played dozens of opponents simultaneously, sometimes while wearing a blindfold.

After much hand-wringing, he decided to return to the United States to attend Yale, which overlooked his threadbare high school transcript. He considered majoring in Russian until Jeremy Bulow, a classmate who is now an economics professor at Stanford, began evangelizing about economics.

Mr. Rogoff took an econometrics course, reveling in its precision and rigor, and went on to focus on comparative economic systems. He interrupted a brief stint in a graduate program in economics at the Massachusetts Institute of Technology to prepare for the world chess championships, which were held only every three years.

After becoming an “international grandmaster,” the highest title awarded in chess, when he was 25, he decided to quit chess entirely and to return to M.I.T.

He did so because he had snared the grandmaster title and because he realized that he would probably never be ranked No. 1.

Teaching stints followed, before the International Monetary Fund chose him as its chief economist in 2001.


I love to play chess… strictly amateur… though in the Hong Kong chess club (long ago) I did once play against a man who had played versus Bobby Fischer. I do not know how his game with Fischer turned out… but do know how our game ended (very badly for me).  My chess set in North Carolina, I bought in Hong Kong about 40 years ago… the only material possession left from those days.
My set in Florida (above) is Bakelite and in Ecuador it is made of glass.  Chess is like life.

In the opening position in a chess game, White has twenty moves, and Black has twenty different replies to each of these — thus there are four hundred possible positions after the first move. After two moves there are more than twenty thousand positions, and after five moves the number of potential chess positions is into the trillions.

A chess master once said “I only think one move ahead. The right one.” While this is more a product of his own (biased) perception of how he thinks, it is partially right. Chess masters don’t gain the advantage from thinking further ahead but from pursuing good lines, and discarding bad moves. The better a player… the less focus is made on thinking about bad moves.

Chess masters also think in chunks.  They think about move in groups, or chunks of moves, while ordinary players think of each move one at a time. Ordinary thought is “I capture his pawn with my knight.”   A chess master thinks “Okay, we continue the Sicilian Defense, then I try another gambit. If he accepts, I go for his king. If he declines, I protect my vulnerable bishop.”  Chunking allows the player to think further ahead, and frees short term memory, the RAM of the brain.

I always have believed that the thought process in chess is similar to investing.  We need to see a bigger picture.  We need to deal with infinite possibilities and we need to connect dots and think in terms of larger pictures.  In my life, I always have a number of chess games going with a number of people…the boards are set up permanently on the farm and in Florida as well as in Ecuador….and online of course with my son who lives in Bristol, UK.  I like the thinking, plotting and enjoy the game immensely.

Know one knows for sure what the economic future will bring and how we’ll end up investing, doing business and living. Thinkers like Rogoff however (I try to fall into this group) simply see a bigger more connected picture.

Whether it is coffee served at your bank (Lifestore by the way serves popcorn)… a new name… a total loss of privacy… another recession or worse or a brilliant recovery… there is one thing we can count on… This time will be different.

If you are looking at the old ways of business and investing, expect that they won’t work.  look instead for new ways that the global economy will unfold.

See details on how to join Merri and me at Jyske’s bi annual Copenhagen seminar here Global Wealth Management Seminar.

Merri and I walk  the waterfront every day when we are in Copenhagen.  We love…


the sights, the…


cafes and…


open air.

Merri and I hope to meet you in Denmark in August!


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They Did Their Homework (800 Years of It)

Will financial firms go abroad to dodge overhaul?