The bankers are back. Will you moan, or will you profit?
Oh, how we snickered.
After years of waving bottles of £11,000 1945 Chateau Petrus Bordeaux in our faces, of bidding up the price of bijou Islington bedsits to the cost of a small farm in Wales, of taking clients to strip clubs, and of stripping away any residual faith in our financial system, the credit crunch meant bankers were finally going to get their comeuppance.
And for many people, revenge felt sweet.
Okay, not quite as sweet when we had to step in with billions to rescue the UK's banking system. And barely even bittersweet when we realized that the yawning funding gap in the nation's finances left by the shriveling of bankers' bonuses meant Britain now had a structural deficit the size of a small African nation.
Even owners of Islington bedsits tossed in their sleep, worried that an exodus of bankers would turn their £250,000 pied-à-terre into a financial black hole.
Dead bankers bounce
In fact, it's rapidly become clear to most UK citizens over the past two years that we need the bankers almost as much as they need us.
In that spirit then, perhaps we should grasp on to something solid, pour ourselves a stiff drink, and make a begrudging toast to the clear signs that the City of London is returning to full health.
Great results
Lloyds Banking Group (LSE: LLOY) is rapidly recovering, Royal Bank of Scotland (LSE: RBS) also looks on track to be eventually sold at a profit for taxpayers, and Barclays (LSE: BARC) shares look cheap too as credit-crisis writedowns evaporate.
Commercial property
Rents for City office space have firmed, and property developers are dusting down their mothballed plans. For instance, British Land (LSE: BLND)has just signed up UBS for 700,000 sq ft in the City.
Lingerie models and champagne
Earlier this month the Daily Mail lambasted Square Mile magazine's 50th edition party, quoting the editor as saying: "They don't all earn a million quid -- some are only on £150,000 plus bonuses."
Hiring
If you can't beat them, perhaps you can join them. UK recruitment firm Morgan McKinley revealed today that job vacancies at financial services firms in London rose 7% in July, while the number of people seeking new jobs fell 16%. This after massive hiring from the likes of Barclays Capital, which has taken on around 3,600 more people in London over the past year.
The right sort of raised eyebrows
Even old school bankers are saluting the performance of the brash young City bucks. Former deputy governor of the Bank of England Sir John Gieve recently told The Today Programme that recovery was proceeding much faster than expected. (Sir John has now joined a hedge fund, doubtless ready to profit from the next financial cycle!)
How to make money from the City
The resurgent City presents an interesting dilemma for the UK's politicians, pundits, and commuters on the Clapham omnibus.
On the one hand, we need the trade deficit to come down, and financial sector services are one thing we're good at flogging abroad. We could also do with the tax revenues from an upswing in corporate profits and a bigger, better-paid City workforce -- and eventually the windfall gain on selling our stake in Lloyds and RBS at a profit.
But others will caution that having an economy dangerously unbalanced towards the inherently volatile financial services sector is part of the problem, not the solution.
After a torrid three years I understand the sentiment, but I don't see much evidence that making more widgets would help. Japan and Germany are held up as the paradigm of manufacturing-based economic virtue, and their recessions were roughly as deep as ours.
What's more, the service sector has the benefit of scaling up and down rapidly to meet demand, compared to the messy business of closing a factory or stockpiling rapidly dating digital clock radios and television sets.
What to do?
More pragmatic readers might wonder how they can profit from an ongoing City recovery.
The obvious thing to do is to buy the UK banks -- unless you're a 'double dipper' they all seem good value. I'd also look at cheaply-rated fund managers and specialists like investment bank Numis (LSE: NUM), which should profit from a return to animal spirits in the Square Mile.
A more tangential play could be to hunt out property developers focused on London and the South East, such as Quintain Estates & Developments (LSE: QED). The City hugely influences house prices in this part of the UK, and thus they may be better able to shrug off the effects of public sector cuts and austerity measures than in the regions.
Finally, you might look for recruitment firms geared towards the financial sector, such as Robert Walters (LSE: RWA). That ship may already have sailed though after a big leap on a second quarter update that picked out -- you guessed it -- a strong showing from the UK financial services sector.
More on the markets:
> Owain owns shares in Lloyds Banking Group, Numis, and Quintain Estates.
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