Thursday, August 14, 2008

Estonians trash their flash cars: can't make the lease payments

The most read post ever on this blog was "Hookers that cost too much, flash German cars and insolvent banks".

In it I predicted a future for the Baltic States where the middle class rioted and Swedbank (the Swedish bank most responsible for funding the bubble) was trashed either by depreciation caused default or just by default.

Anyway I love this story. An insurance company in Estonia is having troubles with customers trashing their flash cars because they can't make the lease payments.

It gets worse and worse and worse from here.


PS. I mentioned the geopolitics in the first post on this subject... I said I was "loudly calling the likely collapse of a politically sensitive country". Well now the Estonian press is actively speculating about a Russian takeover. I think it is unlikely - but do not forget the Bronze Soldier.

For those with a real interest I know enough history to be dangerous. My version comes from the perspective of some Jewish relatives who were holocaust survivors. My relatives saw the Baltic States as containing particularly enthusiastic Nazis. (They tend to site Lithuania over the others but I think that was bitter experience. Lithuania had a gruesomely effective holocaust). Whether the Balts were more enthusiastic Nazis than some other Europeans is something I have no real knowledge of. Indeed the initial Russian-Nazi treaties gave Lithuania to the Germans but the Lithuanians refused to participate in the invasion of Poland and passed to Rusian influence until the Nazis reinvaded...

The Russians still look on the march into the Baltic States as a liberation from Nazism. They revere their Bronze Soldier. Many Baltic people see the same Bronze Soldier as a symbol of Russian oppression.

When the Estonians moved the statute there were deadly riots. These wounds are still open.

My Jewish relatives however wound up living in an apartment building in Bondi Australia one floor above some post-war Lithuanian immigrants. They became firm friends . And both could see the other's point of view..


Anonymous said...

Do you at least know that Baltic states were under the German oppression at that time? And the ones calling shots were Germans?

To say something like "particularly enthusiastic Nazis" is historically very wrong. There is a rather big Jewish community in Lithuania and I as far as I know, they have no problems there.

You might be right about Fannie Mae, but this post is completely ignorant. "I know enough history"? Please.

Anonymous said...

As someone who has lived in that part of the world, who currently lives in Ukraine, and who speaks Russian and Polish, I can say that the analysis of Russian-Baltic feelings is pretty accurate.

Yes, the Lithuanians were probably the most enthusiastic Nazis, possibly followed by the Estonians.

And there is a huge Russian-speaking minority in each of the Baltics, at least in Latvia and Estonia. At least in Estonia, they are treated like third-class citizens.

But next on the chopping black will not be Estonia. It will more likely be Ukraine, to speak of Nazis.

John Hempton said...

To Sweden... The expression I used was deliberate... "I know enough history to be dangerous"...

That is not saying I "know enough hisotry..."

There is a debate to this day about how enthusiastic the French were with participating in the holocaust. The French too have their own version of the heroic resistance.

And there were in all jurisdictions people who participated in rounding up Jews because they could steal their property and there were people who harboured Jews in their house great personal risk to them.

There were amongst the Lithuanians more then 500 people who have been honoured as being in the latter group.

But I wasn't talking about history - I was talking about "perceptions of history" because it is perceptions rather than reality which drive today.

And the next post - by someone who lives in the Ukraine - suggests that my perception of feelings is accurate.

But that is not the point. The point of this post is that the geopolitical risks remain stupendously high here.

As far as my short is concerned my biggest fear is that the West will bail the baltics out because the cost of the Baltics not being bailed out is too high. The Baltics are small states and bailing them out looks an awful lot cheaper geopolitically than many alternatives.

Its not my style to invest on the basis of geopolitics because to be honest I know very little about it. However the risk to my short position is I think geopolitics - so I cannot avoid it.

But this post blog is not about perceptions of who was involved in Nazism and who were liberators. If you want that I suggest you go read Mark Mazower's book (Dark Continent) and when you have finished that can you please try to tell me who the good guys were (because as far as I can see there were very few...)

I am going to conduct my first little bit of censorship here. From now on posts which are specifically about the past Nazi/Russian conflict wil be not posted. Those that are about how the perceptions of the past affect investment decisions that I am talking about now will be put up.

I am almost sorry I bought up the geopolitics - but if someone is truly expert on how the geopolitics affects my investment now then I would love to hear from them.

But if you want to debate history you got the wrong guy because I do not know much - enough to be "dangerous" but the dangerous tend not to know much history.

Anonymous said...

John, even though you are not going to post this comment, you might want to take a look at a very interesting part of Swedish-Baltic history. It concerns the extradition of Baltic soldiers from Sweden to the Sovjet Union, and it is still a highly disputed topic in Sweden today.

It is important because this piece of history is brought up every time someone in Sweden is accused of wrongdoings towards the Baltic states, i.e. "Look how we treated them after WW2, and now we are doing it again.". Even 60 years later, Sweden tries to make up for this episode in history. Some people would even argue that Sweden has a moral, historical duty to help the Baltic states due to Sweden's submissiveness towards the Sovjets during WW2.

This is one of the reasons the whole Sweden-Swedbank-Baltic States-Russia-bailout-etc-discussion makes me nervous sometimes.

Sweden may be caught in an ugly tug of war with Russia about interests in the Baltic states, and this time Swedish politicians are going to have some pressure on them not to give in that easily. And I'm not sure Sweden is ready to mess with Russia.

John Hempton said...

To anon: of course I was going to publish that post. Its about today.

For the purposes of this blog I really do not care what happened in the past.

I care about how the perceptions of what happened in the past will affect my investments now.

Your post goes to that issue.

Now I will do the reading.


John Hempton said...

I apologise - but I have for the first time censored two comments. I did not want to have to censor posts.

Both took offense at my "interpretation" of Baltic history and one suggested that I took argument from the Kremlin talking points.

I do not wish to opine on the truth of Baltic history at all. I wish to dicsuss only on how perceptions of how Baltic History might affect a very narrow investment idea - a short on Swedbank.

If one interpretation here is consistent with Kremlin talking points that doesn't make it true. It does however mean that it is relevant in thinking about how the Baltic economic crisis might pan out.

One post suggested that they were trading against me in the currency. Impossible. I have no currency position. I am only short Swedbank.

I won't censor posts that keep the vitriol out and those who talk not to what happenend in history (of which my knowledge is limited) but talk to how perceptions might affect current politics.

The vitriol is unneccesary. I do not have a dog in this game on how history really was - and frankly I do not care. I really don't. The apartment building in Bondi where Lithuanians and Jews who once did not get on learnt to get on and became firm friends is where my head is...

I do have a dog in the game on how the present will play out.

If the Kremlin strongly hold a view of how Baltic history really was that doesn't make it correct - but does make it relevant to the geopolitics of my narrow investment.

So please keep it to that.

Anonymous said...

You have indeed put your finger on a delicate situation. From a Russian perspective the baltics are just another minority like so many others that are temporarily ar unfaithful to mother russia and will return to it in due course. In fact Putin has long been eager to extend Russia's sphere of influence, and now he has the money to back it up...

The european view on this is more complex I fear. On the one hand the baltics are NATO and EU members and therefore cannot be touched. On the other hand no one really has a clue yet what we've allowed into the EU. If Russia were to behave in a hostile way towards the baltics, I feel Europe would take this as an opportunity to show that they're not always the powerless, dithering club they appear to be in any other military and political crisis.

But there is always the Russian gas and oil to consider...

Putin has a lot to gain if he acts smartly. EU members will be facing a hefty bill for keeping the baltics alive.

John Hempton said...

Marc has nailed my fear on this short.

The Baltics are completely economically stuffed. Argentia level stuffed.

That matters to Swedbank and I am short Swedbank. It is big to Swedbank.

But the Baltics are small in Europe and if you are economically stuffed you become less so when people start handing you billions of euro...

The risk to my short is that the EU bails out the Baltics for geopolitical reasons and as a consequence they bail out Swedbank.

The high emotions around this place are the risk writ large.

But at the moment we have every indication of massive credit crunch in the Baltics. Swedbank is denying a problem (and refusing to raise capital).

"Houston - we have a problem".

Bertrand said...

Dear Mr Hempton,

You write more about Estonia than about the two other Baltic States, and I suspect it is because information in English is more easily available about Estonia, through estonian balticbusinessnews web site.

As a resident of Lithuania, I would like to have your insight in the particular situation of this country. Is the situation as bad as Latvia's and Estonia's ? Growth seems to keep on in Lithuania.

Are these three countries, that you often refer to as "Baltic states" even if in fact you analyze mainly Estonia and Swedbank's situations, interrelated, or could Lithuania get out of the crisis more easily than the two others ?

John Hempton said...

It is true that my examples are more Estonia - because they have an English language site.

My history is more lithuania because I have an interesting, now deceased and clearly biased source on lithuania. I am not here to talk about history though because I know it causes (a) animousity and (b) my knowledge is limited.

But in the original post I said all three economies are a mess - but with special mention for Latvia and least problems in Lithuania.

Lithuania does appear to have least problems in a banking and macro sense -


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