Rob Cameron is the Executive Chairman of Cameron Partners, who describe themselves as “New Zealand’s leading investment bank”. Rob also heads the Government’s Capital Market Development Task Force, and is a well-respected business leader with a reputation for thorough lucid critical thinking and a low tolerance for bullshit.
Last year Rob gave a presentation to the Angel Association conference in which he said that the current financial turmoil would result in conditions that would be “worse than anyone alive today has seen”, and was later quoted in the Business Day as saying “We’ve had about 60 financial crises in the western world since 1700 but nothing of this scale or contagion ever”. Rob has never been seen cavorting with Chicken Little before, and so I caught up with him on Christmas Eve to explore what was behind his thinking.
Key points:
- Previous crises have affected small numbers of markets or investor groups, but the current crisis is global and systemic
- We currently have previously unknown levels of leverage; eg in the 1930’s crisis private sector debt hit at 275% of GDP, but recently reached 380%.
- A depression of the scope of the 1930’s is unlikely, due to the speed and scale of recent government intervention. We’re unlikely to see a 20% drop in output or 20% unemployment. Nevertheless, the global recession is likely to last 2-1/2 to four years.
- Perceptions of uncertainties have increased, rather than the uncertainties themselves — the uncertainties have always been there, we’re just recognising them now.
Rob also offered specific advice for angel investors:
- Focus on having adequate financial flexibility, eg strong balance sheet ratios and access to funding.
- Be ready to seize opportunities as they arise. Opportunities in crises are unprecedented, and in recessions we are more likely to see game-changing moves.
- Recessions cause huge changes in industry leadership; structural changes in patterns of demand lead to new market opportunities.
And his bottom line: These are unusual times that call for unusual measures.
Rob’s reading list:
- Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger and Robert Z. Aliber
- Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez
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1 comment so far ↓
I agree with Rob. The greatest gains we, investors can earn happen during a recession. We should always be ready to recognize and grasp the opportunity as they will unexpectedly happen in areas where we least expect. All the traditional theories, measures, method we use in investing before the recession are inapplicable. We should know how to act according to the market opportunities laid to us.
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