Sell Polish banks

It’s damned expensive in Warsaw; the currency has risen 30% against the Euro within 12 months, driven by high interest rates and the stock market; housing prices have doubled since 2004 and are comparable to Paris, also in part at least the work of hot money; but salaries are lousy. Starting salaries range from 600 Euros to 2,000 euros a month: a joke relative to the prices. People do their best to keep up; they even try to dress well, but the shoes give them away: the best dressed seem unable to afford any half decent foot-ware.

Much of the consumption seems driven by rapid credit expansion. One can’t throw a rock anywhere in Centrum, the city center, without hitting a bank, a credit bureau, or a pawnshop. Up to 10,000 Euros without documentation, they promise. (At 24% annual interest, but that goes unspelled-out). Great business, right? Wrong. 24% interest rates aren’t good business for anyone: they stress the borrower, and a stressed borrower isn’t good for the lender because, sooner or later, he fails to pay. It simply isn’t a sustainable business model.

They also promise – yes, they do – “mortgages up to 100% value of the house”. And one would have thought this sort of nonsense ended last summer with the crash in the US.

How can it not end in tears?

Meanwhile, the stock market has tanked. Everyone seems to think that it has tanked a lot, but they are mistaken. After the recent declines, Polish banks sell at 2.5 times book.

Sell them.