For the past thirty years, many have realized that the thirteen trillion dollars being passed from the WWII generation to the babyboomers, in predominately bank deposits and the family home, are not going to be retained by the children. Babyboomers do not roll over CD's. The banks realized this early and started buying all the security firms they could get their hands on cheaply. The mergers are precarious, as the two cultures are vastly different. I find it perplexing that investment firms are willing to sell themselves now, so cheaply. In the future, the banks will have to buy where there deposit money is going, i.e. the investment firms. Why sell now, when later the banks would have to pay up, just to survive. On April 11, 2006, PiperJaffray announced they were selling its Private Client Services branch network to UBS AG. After having bought themselves back, only a few years ago, from a disastrous merger with USBancorp, Piper has again, like so many before them, sold too early and for too little. The ink is dry and nothing can stop upper management from reaping the immediate benefits of a sale, despite the substantially greater opportunity the future could have held. Instead of being bought, an investment firms could have become the buyer, of the future, as the banks struggled to fight over the dwindling deposits, as the wealth of the WWII generation passed to the babyboomers. But if we have learn anything from the last decade, it is the fact that corporate management rarely looks beyond the last quarter's earnings statement.
The CEO's of the high tech industry failed to realize that their inflated sales of 1999 were not the effort of an outstanding sales force, but rather the result of companies becoming Y2K compliant and purchasing replacements for all their technology, rather than their normal one third maintenance replacement each year for three years. Since everything was replaced there was no need for purchases in 2000-2002. How the CEO's of the high tech industry missed that fact is a mystery, until we see the even larger mistake being made with the lucrative investment firms. Where is the old mindset of running the partnership with a long term perspective and retaining control of the firm's destiny? Has that too disappeared with the partnership?
What are your thoughts? Please share them in the Comments below.