THE LEHMAN CHRONICLES: Richard Croft, chief executive of M7 Real Estate, examines how the use of data can be fundamental in avoiding another financial crisis.
Looking back
Did you sense there was a crash coming?
No, I had absolutely no sense that there was a crash coming. If I had, I would have done a lot of things very differently! Looking back there were plenty of warning signs but Hopium is a very addictive drug and can sometimes mask rational analysis.
What are your abiding memories of the time around the collapse of Lehman itself?
Just how close we came to a complete economic meltdown and the feeling of hopelessness as it became clear in mid 2008 just how bad this was going to be.
How has it shaped things for you since?
The view that we take as a firm on gearing (understanding the impact both negative and positive it can have) has been very much shaped by memories of over leverage and our view of management of data. Data in terms of reporting and identifying trends has become more important than ever and it was that belief that lead to the creation of Coyote.
Looking forward
What do you think is the likelihood of another crash in the short to medium term (and why)?
The likelihood of a crash in the short term is limited based on low interest rates, a fairly steady global economy but the propensity for a black swan event does appear to be increasing.
A combination of Brexit, Trump, the rise of nationalism and the politics that goes with it (which includes protectionism) is definitely a cause for concern as it pertains to real estate. London is already suffering from a slowdown, in my opinion, from that.
Data in terms of reporting and identifying trends has become more important than ever
What things should investors look out for that might signal another crash?
As soon as people talk about new paradigms I think that is a warning sign! The other big warning sign is when people start doing deals that make no sense to you under any metric. When that starts happening the temptation is to think that you are not getting it, but in 2007 the reverse was true.
What sector or geography do you think looks most susceptible to a downturn?
London and the mega cities worry from an affordability stand point and because their values are so demand dependent. It is certainly not a universal view but I am already bearish on London.
