"Più Valore al Risparmio" co Alessandro Foti 22.03.23

Well, certainly today is an event, we usually do these events with interesting topics to discuss, but this time we have something truly current and, above all, that no one expected, because we have already seen many things in the making, but this one is really special. I refer to the fact that about ten days ago we had the failure of this Californian bank, which then triggered everything we are seeing: these problems, runs on deposits, and so on. And here, rightly, someone asks: how was it possible? What can we expect? How can we realize? Because the problem now in the United States is essentially the risk of a loss of confidence in the financial system. The fact that a bank fails overnight immediately raises the question: who was supposed to regulate? Why didn't they notice it before? This is the first point. And here, without wanting to bore the audience with a full consideration, the first aspect that I think many of you may have read in the newspapers or heard is that we are facing a particularly surprising situation. We have banks of the size of Silicon Valley Bank — in Italy or Germany, it would have been the third largest bank in the country, just to give an order of magnitude — that found themselves completely, after the reform wanted by the Trump administration, in a context of deregulation. So it was established that banks below a certain level would not be subject to a certain type of regulation. Now, to be very concrete, banks do a job that is, all things considered, fairly simple. They may complicate it, but they are simple: apart from other activities like managing savings or brokerage, they mainly do two things: they collect money and then they invest it. The problem is that when you want to understand if a bank is working well, you have to look at the funding it collects, what type of funding it is. Is it stable funding? Or is it funding that by its nature is very unstable? Because if the funding is unstable, it's there today and gone tomorrow. On the other side, there is the asset side, where the bank invests its money, depending on where it invests. So it's clear that if you combine, on one side, unstable funding, and on the other side, very rigid investments that are not liquid, then when something triggers a withdrawal of that unstable funding, you have those investments sitting there frozen. At that point, there is a liquidity crisis, and banks usually fail due to liquidity crises, not because they are doing badly, but for this reason. And that is what happened.

And then we have seen not only the American case, but also a European case. Actually, it's an extra-European theme to be more specific, but the issue also affected a bank considered systemic, like Credit Suisse. And the reasons there, too, were what could be called a deposit flight. Does the risk of contagion exist? Or have we, after the reassurances from all the central bankers, now left it behind? Well, I tend to be very constructive about the context, not because I am a conventional optimist, but simply because the financial system is certainly not a perfect system, but like all systems, it is continuously learning. It continues to make mistakes, but it metabolizes these mistakes and emerges stronger from them, a bit like ChatGPT. To return to the case I mentioned earlier, that of Chris: if anyone remembers 2008, when there was the crisis of a so-called systemic bank, the financial system made a big mistake because it thought it was a Lehman Brothers problem and therefore, without taking into account that the interconnection of these banks is so important, it would lead to a crisis, a kind of domino effect. That actually risked becoming a capital crisis, because the 2008 crisis, which then spread to the real economy, was one of the deepest economic crises we have known in recent decades. This time, they learned from that experience. So you saw that practically in a weekend, an incredible operation was carried out, because we put together the two largest Swiss banks practically in a weekend, agreeing on the price and how the operation should be defined. Then there will probably be an avalanche of lawsuits and appeals, because the issue of the famous... This means that the system is much more solid. And the same applies to European banks.

These are the parameters by which we judge how liquid and solid a bank is. Because here too, we go back to when all this crisis happened, in particular the European Central Bank decided to become very rigorous and established very, very harsh standards for European banks. So the ECB is a regulator — we are directly under their supervision because we became a significant bank starting from the beginning of the year — and it is a suffocating regulator, but in situations like this, it ultimately becomes a factor. So they introduced very simple parameters that allow an immediate view to understand the state of health of a bank and, above all, to stop it if it falls below parameters that make it, so to speak, problematic. So maybe it's worth focusing on these for a moment, because I know it's not nice to talk about acronyms, but in the end, you can make many speeches, but looking at these numbers gives you an idea. Starting from the right, the famous discussion of funding stability: we have the NSFR. This measures how stable a bank's funding is. The minimum level is 100, the higher it is, the more stable the funding. European banks are very solid because they have a funding stability ratio that is 30% almost above the minimum required. Then if we move to the asset side, we have an indicator called the LCR, which tells us the ability of a bank to absorb a very strong liquidity shock in a very short period of time, i.e., the bank that loses a huge amount of liquidity in a very few days. Here too, European banks are doing very well: 163% means we are well above the minimum level. And then we have the last indicator, the HQLA, which tells us among the bank's investments, those that can be transformed into cash immediately, thus protecting the bank. Here too, European banks have about 22% of their assets in this way. So if these American banks had been subject to the same type of supervision and had respected these parameters, we would not be here talking about the failure of these things.

So if we were to draw a line, because in the end we can also say, simplifying in some ways, that every crisis teaches something, and that often we grow after a crisis. But from the 2008 crisis to today, which also started from there with some banks, what lesson seems to have been learned, judging by these last ten days? Speed of intervention? Or stricter regulation that has been in place for years already? The lesson we draw is: first of all, all crises ultimately always arise from external factors, it's not that we invent anything new. The world is more or less the same. So in the end, crises, according to what I want to say, all those contexts where what happened in previous crises was taken very seriously and became factors of improvement, have shown that they can face these situations in a very solid way without problems. And third, that regulation by those who must control is fundamental, because simply trusting the good sense of the people who then have to manage certain institutions is not sufficient. And anyway, I know that bankers are probably one of the least popular categories, they have the worst reputation, but banks remain the vital ganglion of the economic system. An economic system without a solid, reliable banking system certainly cannot stand, because thousands of business activities depend on banks. Saving a bank often means saving hundreds or even thousands of companies. So a banker, to safeguard the liquidity of his institution, relies on the regulator. Or is there a maneuver or room for intervention to strengthen the institution itself?

Alessandro Foti, in Fineco, what does it do well? Well, we are a somewhat particular bank because we have a business model that is quite different from traditional banks. For example, what do we have? First of all, we deal with... our clients are predominantly retail clients, meaning we don't have many relationships with companies. So what does that mean? It means that our funding comes from this type of clientele. Second, we are a bank that has an approach that is not only about asset management, but also about providing services. There is a platform where clients can operate 360 degrees: asset management, but also all the transactional banking part, the activity that is normally done, and then there is the entire brokerage platform. And on the lending side, we are clearly not particularly focused on loans, so our investments are predominantly financial assets. From this comes the peculiarity I mentioned earlier: if you remember those famous parameters, on the NSFR we have the most stable funding of any bank in Europe. The probability that the funding could leave is the lowest: 353% against 127. The LCR, the degree of coverage to face liquidity crises, is also the highest among European banks subject to ECB supervision: 787 against 363. And the percentage of liquid assets is 54% of the bank's total investments. So it is a bank that, due to its business model, has an intrinsic characteristic of incredible liquidity. So we are constructive.

It seems to me that the message is that the issue has certainly been contained, but it has had considerable repercussions on market performance in the very short term. We have seen what has happened in the last 10 days in this sense. Now, interpreting the markets in a phase... What happened in the last few days, in my opinion, is a classic example. So we had this explosion of the crisis in the United States, the failure of a bank. Automatically, you have to imagine that markets in the short term are moved by a component... I also explained this in the recent interview I gave during the weekend to Corriere della Sera. I explained that a huge part of the activity is now quantitative and algorithmic. So what happens? When a bank fails in the United States, automatically there are algorithms that connect all banks around the world with the event, so they trigger sales on banks. Then they look at the triggering event that caused the bank to fail, they look at all those in the system that are more or less connected to that, and off it goes. Then this is linked to the fact that if banks fall, automatically it is thought that credit will decrease, so industrial companies are also hit, and so on. At this point, a wave of panic is generated in the market. Then the rest of the market also follows. There are also a series of long-term investors who have risk management limits they must respect, so if the market falls below a certain level, they must liquidate positions. Then there are hedge funds that have leveraged positions, so they are forced to sell. And this triggers a 'wrath of God' situation. So in this situation, whoever is invested in the market because of long-term objectives gets swept away by this context. Obviously, after a while, when the dust settles, the damage is counted, the dead and wounded.

Well, my first thought was: now I'm in for seven horrible days. Because clearly you have to start explaining everything. Then naturally I spent practically a week traveling around London, meeting investors, because at that point you have to explain that you are not like them. Because automatically, the reflex is to check if there is someone in the same situation as that bank. So practically, all the time I would have dedicated to the ordinary activity of the bank, in the end you manage it, it occupies you, you can explain. Then certainly it's not pleasant to see these movements and so on. So my first thought was that. And then I thought: this is yet another opportunity we have to explain well to our clients how to behave when facing markets, because these are extremely... it's yet another event, yet another accident along the way. Later, when we look back in a while, we will see that it was only a small disturbance within a very long-term trend. So from these extraordinary events, which are unavoidable, using a football metaphor, how do you defend yourself? Is there a rule? First of all, you cannot give a generic recipe because each of us must find answers. The first question you have to ask yourself is: why do I save? This is a key point. Because saving is sacrifice. If I earn 100 and spend 80, I give up taking an extra vacation, buying a nicer car, a bigger house, and so on. If I do that, there must be a rational reason. Once I answer that, I am able to say how I should behave. I think the majority of people who ask this question, in the vast majority of cases, arrive at an answer that has an important time horizon. Because if you save because you have a need to satisfy tomorrow morning, that's one thing. But most people save because they have projects, they want to create certain conditions of economic stability in the future, they want to be able to pass on wealth to future generations, preserve wealth, and so on. These are all questions that need answers. And once you have the answer, then if you face markets with a long-term perspective, you can approach them as an investor. An investor means I have a plan to achieve, consistent with my life project, and that implies a certain approach. Or you can have a tactical approach, trying to exploit the abundance of volatility in the market to try to make gains, but that is not investing, that is trading. So being able to make a clear distinction between the two is crucial. If you confuse them, you make big mistakes and, above all, you create conditions for not giving your savings the right return, thus compromising the achievement of your objectives. Perhaps the bridge between these two aspects — planning the future and trading — is the time horizon. What is the value of time? The value of time is extraordinary because time is the greatest ally. Unfortunately, time cannot be bought; it passes, but it is the greatest ally because time amplifies correct choices and penalizes incorrect ones. On the other hand, if we look at some charts, we realize the value of time. Now we are seeing it in a phase where, at least in the last eight months to a year, this passion for coupons seems to have returned. Not only in Italy, but everywhere, there has been a return of passion for government bonds and bonds in general. This already tells us something. But it is absolutely legitimate because we know that Italians are a people of savers; it must be said that they have always been very fond of the coupon. We are not a joke; continental Europe does not have a great culture of equity investment. So structurally, Italians have always invested along three lines: real estate, cash in the account, and coupon investments. Italians have been long orphans of the coupon because with zero or even negative interest rates, the return of investments with yields that are somewhat more decent — because investing at zero rates was not particularly interesting — has rekindled their latent appetites. However, in front of this, we must also keep in mind that it depends on what it is. The question is: is it a correct choice or an incorrect choice? Again, it depends on what we want to do. So here we have reported... I think that if one invests with a time horizon worthy of the concept of investment, and therefore it is not trading, then naturally the objective must be to preserve and increase the real value of one's wealth as much as possible. I think that here there are many entrepreneurs who work exactly with their companies in this perspective. I think no entrepreneur has the goal of having a return equal to the cost of the debt they use to run the company, because in the long run, the company would have little future. So everyone tries to obtain a higher return. So if the objective is this, here we see some data. We have reported what we can call the return of the real economy, which in this case is the S&P 500, the return of Treasuries, and the compounded inflation we have had in the United States in that period. It starts from 1974, but then we also have some other time horizons. The early years are very compressed because things have changed so much that a logarithmic scale would be needed, so it seems nothing happened in those years, but I guarantee that everything happened. More or less the situation is always the same. So what does it mean in essence? That a bond investment, if done well, can give a coverage against inflation that is barely decent. But if you want a significant real return above inflation, you have to invest in the real economy. But why do I say real economy? One of the narratives you often hear is Main Street, the idea that finance is something different, artificial, a fake world, and the real world is the real economy. But in reality, when I take these financial indices, they are terribly real. For example, if I take the Morgan Stanley World Index, when I invest in that direction, I become a small shareholder of all the major companies in the world: I become a small shareholder of Apple, a small shareholder of Nestlé, a small shareholder of BMW, and so on. When I think about this, I say: think of the privilege I have investing there. The best entrepreneurs, the best managers in the world work for me and try to make my money grow. That's not bad. And also intuitively, because the real economy provides the best protection against inflation. You saw earlier, the Goleador card — you should know, I have two children aged 8 and 10, Goleador is an institution for everyone. They pointed out to me that they went from 10 cents, where they have always been in my memory, to 20 cents, an increase of 100%. In the United States, we have...

The Goleador Index, which is processed by the Oratory Study Center, says inflation is higher. And sure, 100% more, but what does one do? One makes the child cry and doesn't buy them, or not? Those won't be the sacrifices that one says, 'Oh well, so be it.' Then afterwards there's the lady who is used to using her nice L'Oreal cream and everything, maybe it costs 10 euros more. But who cares? I mean, I'll buy it anyway. So by investing in those companies, or one decides to have a nice beer with friends because the can has gone up. So basically, what does it mean? It means that if as a private citizen one struggles to protect oneself from inflation, because you have to bear the burden, at least as a saver you can jump to the other side of the barricade, i.e., participate. But I realize it's a bit of an approach that might seem like high finance, but in the end, finance is much less complex than one might imagine.

But here I try to be the devil's advocate, because rightly one looks at this chart and says, okay, take an ETF on the MSCI Morgan Stanley, leave it there, and we'll see each other in 15, 20 years, etc. And that wouldn't be a bad choice, right? No, certainly. But I agree, I agree. However, also speaking personally with entrepreneurs and investors, because that's generally what I deal with, I think that in the midst of all that time, people at a certain point have to manage psychological turmoil, emotions, moments when they say, 'Oh no, now what do we do?' Then the role of the financial advisor — I imagine there are several of you here, and valuable ones from Fineco — the role of the financial advisor is precisely to advise you at a time when you are not clear-headed, because maybe you are in a panic because you have another job, and so perhaps there is also a degree of difficulty. No, it's correct, because this discussion made this way seems like a perfect linear discussion: one looks and says, 'Look, there have always been crises.' Indeed, practically the world seems specialized in going from one crisis to another. Which is true, because the world, human life, is complex by definition. So wars, pertinenze, famines, natural disasters, financial ones are the norm. So if one thinks tomorrow morning to get up and read in the newspapers, 'Look, today everything is fine, no problems,' that will never happen. Also because you are journalists, you want a worse reputation? No, the news of a bad news is not for audience? So we are immersed in this media flow, so one says, 'Okay, okay, that's fine.' The problem is that the beauty and ugliness of financial markets, which we said represent the real economy, and what do financial markets do every day? At every moment they try to establish what is the correct value of all these companies. In my opinion, today BMW is worth more or less. So this causes oscillations that are very violent. One oscillates continuously from one excess to another. Certainly, but in the long run, in the end, you go where you need to go. So we have two problems: first, volatility creates anxiety, and second, it is very difficult to stay consistent, i.e., with an approach that is temporally correct with respect to your objectives. There is a famous old adage: 'Do you know what the definition of an investment is? A trading operation that went wrong.' So then the concept of volatility... I don't know if we have another graph that shows on a shorter time horizon, for example the last twenty years, what happened in terms of crises.

But in general, as we said before, from every crisis you come out strengthened. Then I wanted to simply show you, let's look at this one. These are the last twenty years. The gray line is our famous world, the famous Morgan Stanley World Index. So as we see at the end of this period, there is the list of everything that happened. We won't list it because otherwise we'll get in a bad mood. However, in the end, the world economy — because the world continues to grow — demographics increase, people want to live better, full of entrepreneurs trying to do business, innovate, etc. So it's a natural push in that direction. So in the end, the world grew 652%. The purchasing power of liquidity fell by 43%. But within this, we also took some good scares. For example, if we look, 2008, if I remember correctly, in 2008 the market lost 54%. I don't know if that's where I said a clear mind is needed, because otherwise these nice discussions we are having, connecting under the table, calm and relaxed, then if we go out tomorrow and for some unknown reason the market crashes 20%, and we start hearing... It is evident that in such a situation, rationally what should one do? Because another adage says that the trend is your best friend. So if I say, I'm looking at the world economy and I know that the world economy, between one mess and another, in the end cannot help but grow, what is the best strategy? Obviously buying at lows or selling at highs? Clearly buying at lows, because if the underlying trend is upward, you never get it wrong. Unfortunately, we know that emotionally one tends to do the opposite: when one sees something rising, they take profit and wait. Meanwhile, by the way, I wanted to do a quick poll among you, except those who are particularly attentive. If I asked you, 'In the last 12 months, how did the market perform?' Make a sign. The market right now is, in most cases, above the levels it was at before the war in Ukraine broke out. Yet most of you don't have that perception, because it's all a matter... but that's where we are, that's our fault. You do your job because you rightly need to — if tomorrow morning the newspaper comes out with a nice headline saying, 'Look, maybe in the mountains...' Yesterday all planes landed and took off without incident. One says, 'What kind of news is that?' But it's extraordinary. If instead the news comes out that a plane crashed in Indonesia with 150 dead, that's news. So that's the news that is given every time. Whenever I speak, I happen to talk with Alessandro Foti, always with some metaphor, you must know that by now. And then calm diffuses like the trend, he always makes you understand how things are turning positive.

But returning to a couple of meetings... I don't want someone to leave with the idea that I'm a stereotypical optimist. No, these are concrete data, objective graphs to support. But why is there this tendency lately to think that with inflation at 10-11, now Lagarde has promised that we will reach 2% by any means necessary? I also believe that it's from a part of the salary. Anyway, aside from that, why is there this tendency to think that with coupons, with government bonds, you are somewhat protected even if inflation is a problem? Because when I see a bond, I look at it and I remove, unless I remove the main sources of anxiety: much less volatility, there is a coupon, I'm sure that this return I take home, and at the end of that period they repay what I invested, I don't have to worry about anything. On the other hand, it's clear that one must decide whether to live on these so-called certainties — certainties up to a point, because even in the bond market sometimes there are unpleasant surprises — and decide whether to live quietly without this type of emotional pressure. But we have seen what it means: it means giving up a quantity of value that is truly enormous. Proof is that all societies with a higher level of financial culture, I am referring to the Anglo-Saxon world, the concept of investment in bonds is almost non-existent. If we look at how they invest, the investment is the real economy. But I think these are very easy concepts to discuss with an audience like this because there are many professionals, entrepreneurs, who know what it means to operate in the real economy.

Another thing that I think is interesting is understanding what it means to live with inflation of this kind, which is a kind of hidden tax that we carry along sometimes without understanding the impact it has on each of us. We are at very high values, three, four months ago it was even higher, not seen for decades in a country like ours that historically has been used to such high inflation rates. What does this mean in relation to the discussions we've had? Having inflation doesn't add anything more, in the sense that inflation is a kind of hidden worm that works 24/7 and that even when inflation is low, it eats away the real value of your assets. It's just that clearly when it's high, this erosion process is greater. It's a kind of, I compare inflation a bit to fine dust, because it's something we in Milan know well, we breathe it in full lungs every day despite the bike lanes. Fine dust, just like that, but you don't see it, so apparently we don't worry about it too much. We worry much more about other aspects that are perhaps more visible. For example, in Rome, people are scandalized by the idea of a waste-to-energy plant, but the fact that there is pollution on the streets doesn't bother anyone. Inflation is the same: maybe now it is perceived more because one says, 'Gosh, 10 cents, 20 cents,' it becomes something. But generally when inflation returns to a little more under control, one doesn't perceive it. Just to give an idea: even if we assume that Lagarde succeeds — and surely she will succeed in bringing inflation back to 2% — over a time span of 10 years, just the compound capitalization of a 2% inflation rate means that if I don't actively manage my assets, I will have a loss of real purchasing power that approaches 30%. I would have lost almost a third of my assets just by doing nothing. Exactly. So this is the path generally used when there are big problems to fix: the great exit from debt. For example, now for the Italian state, high inflation is not bad, it's great news. Maybe not this high, but I guarantee you that for a country full of debt like Italy, this is great news. The math is very simple: we all look at GDP, the growth of the country minus inflation, but what matters to a debtor is nominal GDP, i.e., the real growth rate plus the inflation rate. If this is higher than the marginal interest rate paid on debt, the value of the debt in real terms decreases. So historically, exits from large debts have always been done through inflation. Also the recent maneuver on pensions, which didn't provoke huge protests — only in France? No, here in Italy, since there is a social security problem because the Italian pension system due to demographics is not sustainable in the long term, how can we solve it? I can decide not to pay pensions anymore, but that wouldn't be well received, or let inflation do the dirty work by not indexing it. This amounts to about 30 billion euros of reduction in purchasing power over the next seven or eight years or so. Also, inflation is not very democratic: it does not hit homogeneously. Clearly, inflation tends to hit lower income brackets harder because a large part of their income is spent on primary goods. In higher brackets, only a small percentage of income is hit by inflation, but a large component becomes savings. And if that savings is managed poorly, then even I, in a certain sense, am hit by inflation exactly like the lower brackets.

Strongest? The central banks — well, now you are under surveillance because you are systemic, so let's be a bit institutionally polite. But some have accused the Fed in the US of being late. How many times have we heard the word 'temporary'? Temporary, everything's fine. Then there was a rate hike so rapid that it had never been seen, and it brought repercussions. Today I read a study, and later we'll talk about real estate. Today I read a quite interesting study according to which taking out the same mortgage today compared to 12 months ago would require a salary increase of about a third. Has anyone had a salary increase of a third? In Italy it doesn't happen that often. Are the central banks doing well? Should they stop? The Fed just did 25 basis points, as expected, but not 50. I am a little less negative on the work of central banks because from the outside it seems like the gait of a drunk, first one way then the other, but in the end the problem is that they faced totally unprecedented situations. They faced COVID, something no one could have imagined, which caused everything we lived and saw. So the choice was: risk exacerbating certain monetary policy situations, or let the world economy sink into a gigantic depression. The problem of letting the economy sink into a gigantic depression is that once a company can no longer operate, it's not like you can turn them on and off at will. Once the light goes out, once you burn the economic fabric, there is the risk of remaining in that situation. So the central banks, I think correctly, reacted in an extraordinary way. So with negative rates — maybe negative rates were wrong, zero rates with massive liquidity would have been enough — but clearly they overdid it. It was a reaction like when you are about to go off the road and you turn sharply in the other direction. The turn was violent, and now if they don't want to go off the road on the other side, they need to correct. So the impression that we are zigzagging is inevitable because we are facing extraordinary situations. We are witnessing an attempt to normalize the system, which initially goes through forcing because all this liquidity and such low rates for such a prolonged period created the conditions for inflation. I see that the chimney doesn't draw, it's freezing cold, and I start throwing lighter fluid, then keep insisting, and not only does the chimney light up, but the house catches fire. And then I come with a fire extinguisher, and now people complain that the house is flooded. So we are in this kind of phase. Putting ourselves in the shoes of central banks, they are doing the best they can. Sometimes I read critical articles, but they don't give precise indications. How can you give precise indications in such a context? I think even the latest statement by the ECB saying that from now on they will move rates based on data is common sense, because the concept of forward guidance has faded. You can give forward guidance when you are in a more stable system, when you are back on a normal path. But when you are still trying to find normality, you also have points of uncertainty, so you have to improvise. So I am a little less negative on what the banks are doing. However, I am very negative on the lack of adequate oversight by the Fed on online banks. You cannot allow banks of that size to be completely outside any regulation. That is absolutely intolerable.

Other quick curiosities, we are heading towards closing, so real estate, which for Italians is a phase of uncertainty. It's almost something sacred. Because we know that Italian families have about a little more than 10 trillion in assets, that is 10 trillion. To give an idea, Italy's public debt is 2.7 trillion. Of these 10 trillion, about half is made up of real estate assets. So Italians have always been structural, systematic investors in real estate, also for historical reasons of our country. For example, it comes from a long period in which practically you couldn't protect yourself from inflation — there was no other possibility. Remember that throughout the period from the 1970s to the 1980s in Italy, there was no currency freedom. If you wanted to go abroad, you had to justify what you were going to do, then they allowed you to buy the dollars you needed, etc. So it became like that. After that, it is clear that real estate, especially Italian real estate, has a series of structural disadvantages that, except in some special cases, make it difficult. First, we are a country with negative demographics, so by definition the real estate market tends to do better where there is demographic growth. Second, we are a country that structurally grows little, and real estate markets grow more where there is growth. Indeed, Milan's real estate market is more vibrant than others because the GDP of the Milan area is the highest in Italy. Third, there is a problem of overinvestment: 82% of Italian families own a house. We have the highest rate of home ownership together with Greece. In Germany it's 50%, in the US 60-65%. So there is little absorption capacity. And the results? I think we have: we grow only in Milan and Rome. But in the last 10 years, actually it seems that here it shows a decline. Look, just to give an idea: in the last twenty years, the Milan market grew by 70.5% — we noticed that. Rome 56.8%, Italy overall fell by 12.5%. In the last 10 years: Milan +15%, Rome +12%, Italy -15%. One says, 'Well, you know what I tell you? We are in Milan, so who cares if you have to sell, it's fine.' But remember, do you recall what the world economy did in the last twenty years? Someone remembers? +652%! So great, I invested in property in Milan, I'm happy because it performed like that, but the opportunity cost was gigantic. That's the concept. So I think real estate investment absolutely makes sense. I also own properties, but they are more functional to my life, I don't consider them investment assets. Yes, also because now Airbnb comes into play.

Almost something sacred. Because we know that Italian families have about a little more than 10 trillion in assets, that is 10 trillion. To give an idea, Italy's public debt is 2.7 trillion. Of these 10 trillion, about half is made up of real estate assets. So Italians have always been structural, systematic investors in real estate, also for historical reasons of our country. For example, it comes from a long period in which practically you couldn't protect yourself from inflation — there was no other possibility. Remember that throughout the period from the 1970s to the 1980s in Italy, there was no currency freedom. If you wanted to go abroad, you had to justify what you were going to do, then they allowed you to buy the dollars you needed, etc. So it became like that. After that, it is clear that real estate, especially Italian real estate, has a series of structural disadvantages that, except in some special cases, make it difficult. First, we are a country with negative demographics, so by definition the real estate market tends to do better where there is demographic growth. Second, we are a country that structurally grows little, and real estate markets grow more where there is growth. Indeed, Milan's real estate market is more vibrant than others because the GDP of the Milan area is the highest in Italy. Third, there is a problem of overinvestment: 82% of Italian families own a house. We have the highest rate of home ownership together with Greece. In Germany it's 50%, in the US 60-65%. So there is little absorption capacity. And the results? I think we have: we grow only in Milan and Rome. But in the last 10 years, actually it seems that here it shows a decline. Look, just to give an idea: in the last twenty years, the Milan market grew by 70.5% — we noticed that. Rome 56.8%, Italy overall fell by 12.5%. In the last 10 years: Milan +15%, Rome +12%, Italy -15%. One says, 'Well, you know what I tell you? We are in Milan, so who cares if you have to sell, it's fine.' But remember, do you recall what the world economy did in the last twenty years? Someone remembers? +652%! So great, I invested in property in Milan, I'm happy because it performed like that, but the opportunity cost was gigantic. That's the concept. So I think real estate investment absolutely makes sense. I also own properties, but they are more functional to my life, I don't consider them investment assets. Yes, also because now Airbnb comes into play.

But no, the message is that the economy works. The underlying message is that the world is made to be a damned complex place, full of problems, and surely we will have in the coming years a quantity of crises and problems like that, but at the same time the world cannot afford to stop and so it grows, grows without stopping continually. And so we need to get into this order. On the other hand, if we look at where we have arrived, it's hundreds of years that the world goes through... What we are experiencing now, compared to what was perhaps lived going back even 100 years ago, is quite irrelevant. So we can eat, we can eat risotto. In Europe we had the Hundred Years' War, the Thirty Years' War, so for heaven's sake, we can survive, I mean, some little crises of this kind. Let's hope even this one ends within a year.