Source of picture: Time.com
Yesterday I talked about lack of willingness by western banks to lend money because their focus was on rebuilding reserves.
But Steven Major, Global Head of HSBC's Fixed Income Strategy Team, puts a different spin on the problem.
In the Fragile Recovery video from the Financial Times' View From The Markets section, he said banks would dearly love to be earning 8-10% from loans rather than the paltry interest rates on leaving cash in reserves or on low-yield government bonds.
The demand for loans simply wasn't there because the "real economy" had yet to recover to the extent of financial markets, he added.
Stock markets have long been lead indicators, pricing in recoveries before they reach consumers and companies. The same has also become the case with energy markets where price discovery is now driven by futures contracts.
Equities had already priced in strong growth in consumption and company profitability in 2010-11, Major said.
Neither, of course, is guaranteed - meaning that investors entering markets now "are not being paid for the risk", he continued.
The same is true for oil, but fundamentals are set to catch up very soon with a dip to $45 a barrel on the cards before the end of the year.
Here are a couple of questions anybody attending this weekend's European Petrochemical Industry Association (EPCA) meeting in Berlin might want to put to chief executive and chief financial officers etc:
*How much of your recovery over the last few months has been the result of cost-cutting and restocking?
*When both come to an end (and this may well have already happened for restocking) how confident are you on a scale of 1-10 that you'll be able to continue delivering quarter-on-quarter improvements in 2010-11? In other words, can you grow volumes?
The answers could be very telling.