Rolling thunder and Penn Square Bank

When I worked with ChemConnect in the halcyon days of the dot-com era in 1999-2000, we had a fantastic PR lady called Linda Stegeman. Linda ignored conventional wisdom about ‘bundling’ all your best news together to gain maximum impact. Instead, she released the stories one by one, and let them build. First Dow and Rohm & Haas investing; then BASF, BP, Borealis and Bayer; then SABIC; then Mitsui and Mitsubishi, and so on. The impact was extraordinary, particularly for a new company with neither sales nor income to report.
Linda called the technique ‘rolling thunder’, and I was reminded of her when I read this morning that Goldman Sachs were now having to invest $2bn to bail out their Global Equities Opportunities hedge fund. Over the weekend, the papers had been full of reports that US banks were refusing to lend to anyone without a ‘212’ (eg New York) telephone area code, after last week’s losses in Europe and Asia. But yesterday, the ‘rolling thunder’ of the subprime story returned to N America again.
And, of course, every time it completes a circle around the globe, it takes a new twist. First time around, it was about poor Americans losing their homes. Then it became one of central banks trying to avoid a credit crunch. What’s next? Maybe what has been, until now, a purely financial story, is about to impact the real economy? As my wife commented over breakfast – ‘$2bn is a lot of shoes and handbags that the bankers won’t be buying this autumn’.
The subprime parallel then wouldn’t be with LTCM or other ‘financial’ problems. It would be with major disasters such as Penn Square Bank, which went bust in 1982 and nearly brought down much of the US banking system with it. A wonderful book by Mark Singer called ‘Funny Money’ was written in 1985, just as I arrived in Houston, Texas, to trade petrochemicals. Its dust cover reads ‘For the better part of a decade, there had existed a virtually global belief: the price of petroleum and everything that depended on it would go no way than up’.
I have the feeling there may well be a similar book written in a few years time, when the dust has settled on subprime, which simply changes the word ‘petroleum’ for ‘housing’.