KEY POINTS:
How has the credit crunch changed your world?
Staying positive is incredibly challenging given the circumstances. I would like to think that the outcome of today's events mean that regulation will play a more vital role in future financial structures, household balance sheets will provide for a better platform for a sustainable future and that investment diversification will be encouraged and occur.
How serious is the current downturn in a historical context?
The current environment is clearly history making. [It was] led by the easy availability of credit. The current environment will provide a lasting memory to most, just like 1987 did for those investing in capital markets. The household indebtedness is unprecedented coupled with inflated asset values.
The seriousness is that this event has struck at the backbone of the globe, the financial system. We remain dependent on the globe for funding our own growth, something which was less available in times gone by. In saying this, we appear to be following a similar path for recovery with credit tightening, asset revaluation and labour market weakness. The speed of recovery will depend on how quickly the labour market adjusts.
What helps you put it in perspective and stay positive?
Investment-wise, the credit crunch has changed our world dramatically. Our investment decisions have now focused to be on short-term concerns, with a particular emphasis on balance sheet constraints, rather than long-term value (It is difficult to obtain long-term value if the company is unable to survive). While I remain cognisant of long-term earnings, I am currently placing little emphasis on rewarding this potential and suspect the market also remains like myself for some time to come.
At a personal level, I have seen a number of very experienced individuals suffer the consequences of difficult trading conditions. It is never enjoyable seeing friends and colleagues lose their jobs through no fault of their own. The face of the industry is greatly reduced and this is likely to present many opportunities. The environment is about survival and our investment decisions as well as the industry in the short term will remain focused on sustainability.
