Chewing the cud

We field questions to those in the know to find out how economies are fairing, where problems lie, and where money should be placed in the months to come

Michael Knetter, Dean, Wisconsin School of Business

Which government do you think is taking more of a favourable approach to the current crisis?
I think you have to look at states to find good examples of leaders making tough choices and streamlining operations. North Dakota will increase spending and maintain budget surplus by relying on energy and tobacco taxes and license fees for hunting and fishing - all while touting one of the lowest unemployment rates in the nation.

How do you feel about bonus culture?
Pay for performance is a great concept but we have not done very well in implementing it. I think people failed to anticipate how much broad swings in the market might drive performance measures.

How do you think markets should be adapting to the turning economic tide?
I think people should remain focused on the more predictable long run forces that are shaping the economy: technology and globalisation. Technology will remain a force, but globalisation may see some retrenchment in the near term.  

What are your views on the so called “emerging markets” at the minute?
They have benefited greatly from globalisation and may in fact be the countries that lead the recovery in the current cycle.  They still need large infrastructure projects and their consumers are just acquiring meaningful spending power.  

Here’s €10,000. Is this a good time to invest or do you keep the cash under your mattress?
One of my friends said in September to go half cash, half canned goods. But now it looks like canned goods returns might even fall!  I would invest because I have a long horizon and I think technology remains a solid investment.


Richard Bottomley, Senior Partner, KPMG

Which government do you think is taking more of a favourable approach to the current crisis?
The current problems stemmed from the US and they have tried to take a lead in addressing the resulting problems in global financial markets. I feel that governments in the US and the UK have been more transparent than many other countries; more honesty and transparency would enable us to hit the bottom and start the recovery.

How do you feel about bonus culture?
When bonuses comprise the lion’s share of a person’s income it can and often does drive bad behaviour.

How do you think markets should be adapting to the turning economic tide?
I struggle with some of the extreme fluctuations and reactions in financial markets, I cannot help thinking that someone is going to make a lot of money when the property and banking sectors recover.

What are your views on the so called “emerging markets” at the minute?
Grow rates in emerging markets have been impacted by the global financial crisis, they cannot achieve double digit grow without significant international trade. I expect China to be affected more than India.

Here’s €10,000. Is this a good time to invest or do you keep the cash under your mattress?
If you have cash today there are many opportunities to invest and make a good return. I wouldn’t put it under the mattress; I sleep badly enough as it is!  

Sam Malin, Chairman and CEO of the Avana Group

Which government do you think is taking more of a favourable approach to the current crisis?
In terms of the US and the UK government, I would think the UK. Both are flawed but the US seems to be throwing a lot more money at problems and not discriminating between good institutions and bad institutions.

How do you feel about bonus culture?
Whilst the bonuses do seem to be particularly large, it’s difficult to see how an outsider could regulate them because that would warp the free market. I think it would be appropriate for bonuses to fully reflect bad performance and it does seem that they fall so much short on that.

How do you think markets should be adapting to the turning economic tide?
One of the keys I think is transparency. Hopefully transparency would reduce the amount of over the top leverage that people enter into. A lot of problems over the last twelve months have been the huge swings in commodity prices and that’s due to trend speculation and leveraging of provisions.

What are your views on the so called “emerging markets” at the minute?
Firstly I think the emerging markets have an opportunity to learn from the mature or more developed markets and to pick up lessons, making sure they are transparent and making sure that they put in appropriate regulation. Emerging markets, even in the current climate do offer a way of spreading investment risk and so they should be taken seriously from that perspective.

Here’s €10,000. Is this an excellent time to invest or do you keep the cash under your mattress?
It is an excellent time for someone who has liquidity to fully leverage that cash. However, you have to tread with care due to the number of cash starved projects jostling for that cash.