AMSTERDAM – With QE2 in full swing, the presumption is that credit will become more available. The thing is that businesses don’t believe it – yet.

Last week I was here for an aviation conference. As readers of this blog will recall, Bank Innovation’s parent, Royal Media Group, diversified beyond financial services with the acquisition of Air Cargo Management Group earlier this year. You may wonder how the two industries interface, but, in fact, aviation offers a remarkable window into the perceptions of not just Corporate America, but Corporate Earth, since aviation appears to me to be among the international of industries on the planet.

Aviation is also greatly reliant on financing. The days when airlines made the vast majority of aircraft acquisitions is long gone. Today, financing – and particularly aircraft leasing – drives airplane purchases. Want proof? Here’s a quiz: Which company worldwide owns the most aircraft today? Try GE’s aircraft leasing unit, GECAS.

Enough background. What I saw here in Amsterdam was that aviation executives, despite QE2, do not believe that more credit will come available soon, and that was interesting because aviation – and particularly air cargo – is acutely sensitive to global trade and consumption. If the global economy is poised to rebound courtesy of QE, then shouldn’t air cargo executives recognize that bankers will soon come knocking with more attractive credit terms?

Oddly, this pessimism was juxtaposed by what we know here on Bank Innovation: that Wall Street investors in recent weeks are in a primal hunt for yield. And that hunt has become all the more pronounced with QE2. From the WSJ today:

The Fed is trying to keep rates on relatively safe Treasurys and cash so punny that investors will be enticed into riskier assets such as stocks, commodities and corporate bonds, helping inflate their prices.

“Punny” indeed. So why would the senior aviation executives I spoke with from mid- to large-sized companies not see the green lights of more credit? One more: lag. There is a time delay between the market factors leading to more yield-related investing and what Corporate Earth sees as reality in its financing. But clearly this disconnect will be bridged – yesterday’s rocketing stock prices is the start – and when it does, to my mind, the global economic rebound will truly kick in. Will that create a bubble? Probably, but right now business executives just want to see more fiscal support from the banking community. Someone send them a memo: the credit is coming.

110310liquidity

Why QE2 Will Bridge the Disconnect Between Investors and Business

AMSTERDAM – With QE2 in full swing, the presumption is that credit will become more available. The thing is that businesses don’t believe it – yet.

This week I was here for an aviation conference. As readers of this blog will recall, Bank Innovation’s parent, Royal Media Group, diversified beyond financial services with the acquisition of Air Cargo Management Group earlier this year. You may wonder how the two industries interface, but, in fact, aviation offers a remarkable window into the perceptions of not just Corporate America, but Corporate Earth, since aviation appears to me to be among the international of industries on the planet.

Aviation is also greatly reliant on financing. The days when airlines made the vast majority of aircraft acquisitions is long gone. Today, financing – and particularly aircraft leasing – drives airplane purchases. Want proof? Here’s a quiz: Which company worldwide owns the most aircraft today? Try GE’s aircraft leasing unit, GECAS.

Enough background. What I saw here in Amsterdam was that aviation executives, despite QE2, do not believe that more credit will come available soon, and that was interesting because aviation – and particularly air cargo – is acutely sensitive to global trade and consumption. If the global economy is poised to rebound courtesy of QE, then shouldn’t air cargo executives recognize that bankers will soon come knocking with more attractive credit terms?

Oddly, this pessimism was juxtaposed by what we know here on Bank Innovation: that Wall Street investors in recent weeks are in a primal hunt for yield. And that hunt has become all the more pronounced with QE2. From the WSJ today:

The Fed is trying to keep rates on relatively safe Treasurys and cash so punny that investors will be enticed into riskier assets such as stocks, commodities and corporate bonds, helping inflate their prices.

“Punny” indeed. So why would the senior aviation executives I spoke with from mid- to large-sized companies not see the green lights of more credit? One more: lag. There is a time delay between the market factors leading to more yield-related investing and what Corporate Earth sees as reality in its financing. But clearly this disconnect will be bridged – yesterday’s rocketing stock prices is the start – and when it does, to my mind, the global economic rebound will truly kick in. Will that create a bubble? Probably, but right now business executives just want to see more fiscal support from the banking community. Someone send them a memo: the credit is coming.