Well we have interesting times here in the UK. My current account has been with Halifax Bank of Scotland (HBoS) and my mortgage is with Bradford & Bingley. This month both banks have seen their share price collapse and they have been taken over. On 17th September it was announced that Lloyds TSB was taking over HBoS. Now today I see that Bradford & Bingley is to be nationalised and sold (presumably at a firesale price to Banco de Santander or Barclays).

Ho hum! Well at least I have not seen a run by account holders with either bank. But I wonder if this bank consolidation will actually lead to more confidence in each other. It seems like no bank is willing to lend to another at present even though some have plenty of cash.

Demutualisation of friendly societies used to be trumpeted as one of the successes of British capitalism. Obviously account-holders who benefited from selling shares in the new 'mortgage banks' made a profit, however this took a safe, prudent set of societies who worked in the interests of their members into the brave new world of high risk banking. With hindsight we would have much less of a credit crunch here in the UK if there had been no demutualisation.

For years the United States government and institutions - along with the Thatchers, Blairs, etc in other countries - have lectured on the importance of free markets and of the evils of state bailouts. They have also railed against regulation. It is now quite incredible that with the credit crunch causing real casualties, that the United States government is likely to spend $700,000,000,000 of taxpayer's money to buy up dodgy or "toxic" assets.

I do not envy the likes of Hank Paulson or Ben Bernanke who face a major dilemma:

a) Go the "economic Darwinian" route and allow institution after institution to fail and there is a risk that a large number of ordinary US taxpayers may lose their money - other than what is covered by deposit protection schemes - due to further collapses of financial instutions. Nobody would want to see the tent cities of the Great Depression because of people being evicted from homes they can no longer pay for.

b) Go the "state interventionist" route and prop up failing institutions and there is the risk that millions of small guys - who pay tax and do not have clever beancounters who help avoid it - will pay for the greed and folly of those bankers who ultimately have caused the crisis.

Most capitalists believe in unreining markets and that free markets will ultimately work for the good of all. If true it would make life very easy indeed. However it is patently obvious that markets can be bent by for example monopolistic companies or recently by derivative products that are opaque to those who trade in them.

For everybody's sake I hope that there will be a return to stability. However, I hope that the solutions being contemplated in Washington will not those who have profited from selling collateralised debt obligations (CDOs) and other toxic products. I also hope that a more thorough approach will be taken to regulate financial markets. This need not be bureaucratic but must force financial institutions and their staff towards responsible behaviour.

Above all there must be transparency. A key cause for the current credit crunch has been that some derivative products like CDOs have not been transparent. Their value (or lack of it) and risks has been hidden by layers of packaging. A very scary thought is that accountants seem to be moving away from transparency. A letter in last Thursday's Independent by Malcolm Howard warns that new international accounting standards are moving away from transparency. If he is right this needs to be nipped in the bud!

From what I recall, Chicago O'Hare's Terminal 5 - the "International terminal" - was built in the mid 1990s. From what I recall then - flying with American Airlines - was that the O'Hare T5 immigration section was far faster than other airports such as San Francisco (I have not been to San Francisco for some years but know that they have a significantly better area for international arrivals now). The hall where passports were checked was large and there seemed like a big baggage claim area.

However, flying with American meant that departures back to Europe were from Terminal 3 which American Airlines also uses for domestic connections. I therefore never got to see what the departures area of Chicago's Terminal 5 was like. In the last 3-4 years I have flown to Texas using a Gatwick-Dallas connection then taken the short connection to Austin. This was not available and the booking system came up with BA to Chicago then AA onward to Austin.

Yesterday I arrived in Chicago from Austin and proceeded to T5. I expected a spacious departure area with plenty of space for shopping, eating and drinking. I expected a similar space to the arrivals area. I was shocked that once I was through the security checks the main departures area was the five metre wide corridor you see above with tiny stalls selling things. There was a small "concessions area" to the right and there was a BA lounge hidden away but very acceptable. I was underwhelmed at the design...it seemed like a missed opportunity.

For most of the last decade I have generally flown in 777s or 767s across the Atlantic. Overnight it was a 747-400 for a change...and on arrival Heathrow's Terminal 5 seemed hugely impressive in comparison.

The only downside of arriving at Heathrow T5 was that BA had sent the outward flight from Terminal 4. The dog's leg journey using the Heathrow train system and a change at Heathrow Central was timeconsuming.

I am staying in a fairly large hotel in Austin, Texas. Austin has avoided the devastation of hurricane Ike and indeed has been a key shelter area for those fleeing Ike or the earlier Gustav hurricanes. Houston, the city where NASA's Mission Control is based has been devastated so it is obvious to ask who is controlling missions like the International Space Station. The Austin Statesman newspaper claimed to have the answer today.

A brief statement from NASA on Thursday set a minor Hurricane Ike odyssey in motion: "The International Space Station Flight Control Room at Mission Control in Houston was shut down Thursday morning. Station flight control continued through backup teams located near Austin and Huntsville, Ala."

Logically, a team escaping the giant storm would head up to Alabama to guide the space station from the ground, since a back-up control room stands at the ready there.

But near Austin? Is there a secret control room here?

Calls to Central Texas public agencies, evacuation officials, hospitality industry leaders and hotel managers Friday failed to produce results.

"Yes, a team of flight controllers with high-speed laptop computers has moved to an Austin-area hotel and is controlling the space station through high-rate data lines back to computers at Mission Control in Houston," said NASA spokesman Michael Curie late Friday. "Mission Control has power and generators in case it loses power. A backup plan in case Mission Control loses power will hand control to another tram of Johnson Spacecraft Center flight controllers who traveled to Huntsville, Ala."

A hotel near Austin. But where?

"We don't have an exact location, other than they are in the Austin area," Curie said on Saturday. "They will remain until Houston's Mission Control Center returns to normal operation. It is too early to know how long it will be before that happens."

 In my childhood I recall seeing Mission Control in Houston with rows of computer terminals and a big map dealing with Apollo moon shots. I realise that computing hs moved on massively since then. We are not only past mainframes but mobile computing has become the norm. We are regularly hearling of sensitive UK Government data getting lost when an official loses his laptop after work in the pub. However, despite that I find it bizarre that the space station might be controlled from laptops further down my hotel corridor.

This is especially odd when there is a fully functional backup control centre in Alabama. It was surely not for the Ike parties that were running in Austin on Friday night.

However, if the statement "a team of flight controllers with high-speed laptop computers has moved to an Austin-area hotel and is controlling the space station through high-rate data lines back to computers at Mission Control in Houston" is true they cannot really be in my hotel. Broadband speed here is adequate but not stunning!

I am writing this from Chicago O'Hare airport - definitely not the worst entry point to the US - on my way to Austin. In two decades of regular travel to the US I have never been told by an immigration official that I will probably not make it to my destination but was this time.

We were a bit delayed on leaving Heathrow but flying over Canada there was a 175 km/h headwind. Normally there is a headwind heading west but this is more than I can recall seeing previously. We were not that late in arriving despite the headwind but there was very low cloud and local TV was reporting flooding.

A hurricane is a terrible thing and I was aware before leaving that it was hitting Galveston where a century ago there had been massive deathtoll. However in our media-obsession with richer countries let's not forget Haiti where it is reported that one million are homeless! Haiti has almost no infrastructure and is very poor.

My flight to Austin was cancelled, presumably due to the hurricane, I waited in a long queue for people who had not made their connections. Many will not be able to fly tonight. I have mercifully been booked onto a 22:00 flight to Austin...mere inconvenience compared with those poor people who have faced the devastating power of Ike. Many passengers did not fare so well either and had to get flights the following morning.

O.

Background

We are currently in a time of international property woes. Banks in much of the western world are facing liquidity and confidence problems because of greedy investments in dubious investment vehicles that were based on bad quality property loans in the US. As usual while huge profits were made by those driving those investment vehicles there were almost no voices in the financial world who were predicting that the market was unsustainable.

DISCLAIMER: Oregano is no financial adviser or genius. The following is just "stream of consciousness output" and may not be construed as financial advice. Indeed Oregano's stock picks are usually best avoided!

Dire Warnings

I am an engineer, not an economist, but there have been a few worrying signs around investments in the last decade. In the 1980s I did (to my later regret) not take advantage of the privatisation of UK companies e.g. British Telecom because I felt it was wrong that the Government was selling assets owned by taxpayers. I later realised that it was good if most citizens participate in the stock market but am still very sceptical about the ideologically-driven (rather than taxpayer value-driven) privatisations in the UK. I still fear it was essentially redistribution of the wealth of the UK from the taxpayers to the wealthy.

When Deutsche Telekom offered its customers shares when I lived in Germany in the 1990s I already owned shares of a few companies and took part profitably. Shortly after returning to the UK, I was amazed that taxi drivers in Munich were giving me stock tips. On the one hand it was a sign of progress that German citizens were finally making their own stock investments, however on the other hand it was a scarey signal. Most market bubbles take place when naiive investors get involved - and with all due respect  for my taxi driver - we were about to hit the telecom bubble bursting. I heard that chambermaids took part in the final stages of the South Sea Bubble in the 1700s.

I bought my first property in 1985 midway in a big upswing in the London property market. After having moved to Germany we decided to sell in 1989 which was just when the market bubble was bursting. Foolishly I was greedy and listened to an estate agend (in his mid 20s) who convinced me that the market trajectory was continuing and that I should adopt an aggressive selling position.  A rival - actually Halifax agent - of the same age - said that the market was slowing and that I should expect a lower selling price if I wanted my property to go. The Halifax guy was right and I ended up selling much later than expected and at a lower price than he had suggested.

We should not be surprised at a mortgage problem in the UK quite independently of the US mortgage crisis. When I bought my first property I was allowed to borrow 2.5 x my salary. Two years ago I was hearing of offers of 6 x somebody's salary. OK, interest rates are much lower than in the 1980s but this is a sign of an exuberent unsustainable market.

Assets and Investments

In Germany when I made my first investments in stocks and bonds my first step was to buy a 100-page paperback on investing. This German language guide was simply written (just as well given my language skills ) but has never been contradicted by what I have subsequently read in the British or US financial press.

Three key things were:

a) Understand allocation betwen different asset classes e.g. shares, bonds, property and cash. There are different risk/reward relationships with any of these asset classes. Shares may go down dramatically as well as go up; though on average give better returns than bonds. Bonds are subject to less volatility but on average have lower returns. Cash is not volatile but tends to have low returns. Property often has had spectacular gains or losses but unlike shares is not liquid. In a down market it may be relatively easy to dispose of shares but tough to dispose of property. Similarly in an  overheated market it is still possible to purchase shares (at an inflated price) but may be tough to acquire property.
b) Diversity risk. Regardless of asset class it is important to diversify the investment. For example, it is safer to split a stock portfolio between 10-20 shares rather than say 3 shares. It is safer to split a property investment between 10 properties than 2. It is safer to split retirement savings between 3 fund managers than just one; remember Equitable Life.
c) Investment Horizon and Liquidity
With any investment you are expecting a payback sometime. Most issues depend on your investment horizon; in other words do you want a return in say 18 months or 10 years. The answer will determine your attitude to risk. A short investment horizon will mean risk minimisation while a longer horizon will make more risk taking attractive.
In either case it is important to consider liquidity - the ability to buy or sell assets. A market with no liquidity works against any short term investment strategy. In the short term bonds or stock are better investments in general than property because they can be disposed of easily.

Property Focus or Obsession?

In the UK, the desirability of investing in property has been unquestioned in my lifetime whether by the man/woman in the street, journalists or financial institutions. However while that might be reflected in say the US or the Netherlands it is not necessarily reflected in say France or Germany. In some of these countries I fear that most people - those in favour of property investment or against - have not thought through the basic principles.

Bubble property conditions aside, I worry when friends have referred to their nice house as their "pension". In an inflating property market that might make sense providing you convert the asset into a pension-friendly form when you are close to retirement. In a deflating market too much tied up in property can be tough to dispose of. You also need to be willing to downsize or move to a less expensive area to realise the "pension".

My fear is that too many people in the UK have invested in property (rather than say alternatives like stocks or bonds) withouth thinking through the consequences. Property does not create value in the sense that say a growing company can. Its value (and potential rental income) is really based on supply and demand so is a good investment for a period of time when accomodation is in short supply but no good if there is oversupply. Company shares potentially can provide more if they innovate or establish new markets. Think of Apple in the last decade with their iPod products or ARM in the UK. Of course companies can stagnate too.

Of course there is one very good reason for purchasing property and that is to provide a roof over your head. This avoids rental payments (though generally mortgage payments will be greater) and gives more control over the property. The obvious advantage of owning is that after the loan is paid off there are no further payments needed plus the asset can potentially be sold.

Of coursre the value depends on what subsequent purchasers think. Having paid off a mortgage, a declining asset may  be a millstone round the neck.

Buyng for Rental?

This is a tricky area where I cannot give good advice other than to be cautious in the current climate. I would rather live off a property portfoilio than do my present job..Yet I cannot conceive that I can purchase such a portfolio in the short-term despite depressed markets. However I can more readily purchase assets in depressed stock markets.

Right timing can produce fantastic gains in property asset values but requires more research than I have undertaken.

I am betting - and this is absolutely no investment recommendation!! - that the stock market will recover more quickly than the property market. Even if the stock market mildly corrects as an investment it also has the advantage of being more liquid.

...Sorry for rambling so long.

One thing that we noticed (and has been noted by Technomist) on our holiday was the number of blue and white ceramic tiles we saw in various places in Portugal. The colours were reminiscent of those used in Delft pottery. It seems to have been used in different centuries.

They were used at the main entrance to Óbidos. This part was obviously newer than the town walls and castle but must be a few centuries old.

This tile mural is at the public washhouse in Peniche. It was obviously built in the last century and to our surprise is still in use.

This set of tile murals with a monastic theme was seen walking down from the Sao Joao castle towards the Baixa in Lisbon.

Finally there are blue and white tiles as the backdrop to this fish counter in Peniche.

This recent holiday is not my first time in Portugal. I have had two business trips for sales conferences to Lisbon when we were bussed from the airport to a hotel. We then sat through several days of presentations then were bussed back to the airport. As a presenter on both occasions I was not bold enough to venture out after 23:00 for late night exploration. Last year we explored Belém a little but did not see central Lisbon.

This year I realised I did not even have a mental picture of the centre of Lisbon. Books and articles on Portugal regularly feature the Jerónimos Monastery (shown above) or the Torre de Belém or the Navigator's Monument. However all of these places are in Belém rather than Lisbon itself. Of course Belém is only 6 km west of the centre of Lisbon but while historically important it is not the capital.

This holiday we decided to take a walk around the city centre and we were pleasantly surprise. We started out at Santa Apolónia railway station and headed upward in a northwesterly direction through the narrow streets of Alfama. This was the Moorish old town and the streets are narrow, crooked and in many cases just pedestrian stairways. It was difficult to follow a particular direction and we ended up zigzagging northwestward and updward.

At the top of the hill is the castle of São Jorge; this was again something I had never seen in photos of Portugal, yet well worth the walk.

The castle was originally built by the Moors but subsequently extended after the reconquest. It is possible to go inside the main keep and to walk along the walls and go into the towers providing you pay the entrance fee.

It also offers great views over the city centre such as the view below to the Rossio square and station to the north west.

The Rossio is at the north end of the Baixa district that was devastated by the 1755 earthquake and tsunami. It is now laid out in a grid iron pattern.

We wandered down the hill towards the Baixa hitting a street where trams made the journey uphill.

Now I must admit I have seen pictures of Lisbon's old trams. The street here is Rua de Santo Antonio de Sé where we also stopped for lunch. Turning left after a few blocks we came into a huge square with a victory arch and numerous government buildings. The square looks out on the south side to the Tejo river.

Despite the fact that Lisbon itself does not seem that well known by most UK people, I think it is will worth a visit and would like to explore more on a future visit.