By Tom Bradley

“Things will never be quite the same again. Western businesses in particular will be well served by moderating future expectations. That goes for investors too.”

- Tim Price, PFP Wealth Management, June 22nd, 2009

I read Tim Price regularly and always enjoy his perspective. I also understand the predicament that the developed nations have got themselves into. My 2009 mantra – the strong get stronger – applies to countries as well as companies. The world order will go through accelerated change as a result of the recession and financial crisis.

But I think the ‘it will never be the same’ statements we’re hearing from Mr. Price and others are gratuitous. We are always in a state of ‘it will never be the same’. People and businesses change and adapt. We use iPods instead of record players. We ride 21-speed bikes instead of 3-speeds. We have shoes for every sport instead of one set of sneakers. We own a Wrap portfolio from our bank branch instead of stocks with a broker.

Capital markets will continue to go up and down with new information and changing investor sentiment (the stock market is up 30-40% from its ‘end of the world’ low in early March). Investment bankers will help companies raise capital in the equity and debt markets (my bondie friends have never been busier doing new issues). Businesses and investors will use less leverage than they did a few years ago. And cycles will be as predictable as rain in Vancouver.

In a speech last week, Scotiabank CEO Rick Waugh said, "Expectations have to be adjusted. We are in a new norm.” He went further to say, “That new norm means a lower level of absolute profitability."

These comments make good press, and public relations, but they fly in the face of the facts. The gem of Canadian industry, consumer banking, is better than ever. Executives in other sectors would kill for the banks’ margins in wealth management. And in their capital markets businesses, there is a lot less competition.

To re-enforce the point, consider BNS’s most recent quarter in which its return on equity was an obscenely good 17.6%, down from an indescribable 21.4% a year ago. 17.6% in the middle of a recession. I rest my case.

We are being subjected to too many grandiose statements about the world changing. We are in a recession. Times are tough. But the cycle will play out like every other and new winners will emerge on Wall Street and Main Street.