On the brink of financial meltdown

On 26 March 2009, in the midst of the worst economic and financial crisis since the 1930s, John Schoser took part in a panel discussion on asset management at the Urban Land Institute of the Chicago District Council. The precise title was “Asset Management: The Importance of Effective Management During Turbulent Times”. John was invited in his function as Morgan Stanley's executive director of merchant banking. Notably only a few months before, in September 2008, his own employer Morgan Stanley was said to be close to bankruptcy and almost fell victim to the crisis.

Dow Jones Industrial Average Index (1/1997-7/2010)

The general situation in March 2009 is also well illustrated by the fact that on 6 March 2009 the New York Stock Exchange hit its lowest point in 13 years representing a loss of more than 50% compared to its all-time high only 17 months earlier on.

During the discussion, John stated that the speed with which the economic turmoil had struck caught people by surprise. Moreover, he cautioned, “We are far from touching bottom and things are going to get way worse before they get better.” With the benefit of hindsight, we now know that the economic situation started to improve in the course of 2009 because governments throughout the world intervened heavily to save banks and stimulate the economy.

In relation to his career, John was asked what skills an asset manager must have. “You’ve got to understand value, what creates it, what detracts from it. You need to have good financial skills, understand what net present value means and (understand) the financial impact of actions”, John replied. He also stressed being an effective negotiator, which rests partly upon your ability to set appropriate expectations with a variety of parties. A challenging job it would seem, in particular on the brink of global financial meltdown.