Better Credit Research one of the lessons of the Credit Crunch

The Credit Crunch that we experienced during the past 2 years has produced – apart from financial pain the world over – an unprecedented amount of hot air. We are talking about the countless statements by politicians and self-appointed pundits in the media and academia who have proposed various measures of reform.
Rather than waiting on the outcome of the ‘Global Dialogue’ we suggest investors rely on common sense and focus on improving their own protection against the recurrence of a similar disaster.
Credit Research should be high on the priority list of every Chief Investment Officer or Senior Investment Professional.
We are not surprised to see strong demand for seasoned credit analysts and expect this to continue. Fortunately the convulsions in the financial markets have also resulted in a number of good quality analysts becoming available through no fault of their own.
Should you be looking to upgrade or expand your credit research effort we would be happy to discuss this with you or someone in your organisation.

Wrong time to raise levels of base salaries

Several Investment Banks have decided (or are investigating) to increase basic pay of employees in compensation for (expected) lower bonus payouts in the future. We think that this rush to boost the fixed costs of the business may be pre-mature. A recent report predicted that global investment banking revenues will drop by about a quarter this year. Revenues from the Securities Business may also not hold up after a quite profitable period at the beginning of 2009 and revenues from Asset Management will remain under pressure. Then there is the political aspect as the industry has just been saved from itself at great expense to the taxpayer. Even the well-run companies can only thank governments as without the bailout they would have been gone down together with the weak banks in the financial tsunami of 2008. So it may appear that already well-paid professionals get compensated for the loss of bonuses that may not be there (or might be much reduced) at the end of 2009.

Tax, Regulation and Financial Centres

A cursory comparison of personal income tax rates would cause us to cry out: 'Go East young Man!' for the tax rates in Hong Kong and Singapore are certainly mouth-watering. Young professionals in particular have not yet put down strong roots and can afford to be venture-some, - and the really big hitters have the financial means to make it painless to relocate to friendlier tax regimes. Add to this headlines such as this one: 'FSA threatens City with higher fines' and the case for the long-term decline of the City and Europe as a Financial Centre becomes stronger.