by Mark Yakabuski, CAIRP President and Chief Operating Officer
March 26, 2015
I am freshly returned from the INSOL Conference in San Francisco, which was held March 22 to 24. (INSOL is the International Association of Restructuring, Insolvency & Bankruptcy Professionals)
[caption id="attachment_85" align="alignleft" width="300"] CAIRP President Mark Yakabuski and his Australian counterpart John Winter[/caption]
I say fresh not only because it was refreshing to escape our frigid weather for a few days. But more importantly, I feel fresh because of the exciting ideas that circulated at the conference and challenged delegates to see a lot of things in a new light.
I’m especially talking about the amazing presentation given by Ken Moelis, one of the most noted investment bankers in the U.S. over the past 30 years. He has seen a lot of cycles in his time and has drawn incredible insights from every upturn and downturn he has experienced.
Here is his latest: WAKE UP CENTRAL BANKERS: WE ARE ALREADY EXPERIENCING A PERIOD OF DEEP DEFLATION THAT IS TRANSFORMING THE STRUCTURE OF FIRMS AROUND THE WORLD!
Fueled by incredible technological change, the things that increasingly dominate our business and private lives are constantly decreasing in price: the iPhone 6 succeeds previous versions and offers a whole bunch of new capabilities at essentially the same or lower price; the cost of seeing movies (through a myriad of streaming video options) has never been lower; the cost of computing devices (computers themselves are more and more passé) is constantly coming down; even the cost of driving in North America has been declining because of new car-sharing technologies that didn’t exist a decade ago.
In an environment of deflation, successful firms are those that drive every possible cost out of the system. That’s why we are seeing so many tax inversion schemes on the part of major corporations: not because they are in some way “unpatriotic” but because taxes are a major cost of doing business and have to be streamlined if the corporation is to succeed. It’s also why M&A activity is heating up again as firms seek out synergies that can reduce their costs and allow them to beat their competitors. You can even see the massive anti-corruption campaign taking place currently in China as an attack on a huge cost in the system that leaves China uncompetitive in many industries.
[caption id="attachment_87" align="alignright" width="500"] (l to r) CAIRP Vice-Chair David Wood , Chair Paul Casey, and President Mark Yakabuski hard at work representing the association at INSOL San Francisco 2015[/caption]
Oh, and here’s one of Ken’s other insights: in a deep deflationary period, don’t expect interest rates to go up anytime soon…
Add to this 15 other incisive presentations at the conference that included:
- An inside look at the City of Detroit’s bankruptcy,
- A review of corporate group restructurings and insolvencies (where Nortel came up more than a few times),
- Predictions as to how insolvency law reform would work itself out in the European Union, and
- A fascinating discussion of the new financial instruments that could permit a restructuring of the biggest financial institutions that didn’t even exist before 2008.
