Guest comment: Back down to earth with a bang

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Shaun Springer, chief executive of search firm Napier Scott, predicts the landing - when it comes, will be a hard one.

There's little denying that City recruiters today are having the time of their lives - financial institutions require new staff to handle increased business activities and to meet future needs. Demand for good traders, marketers, structures and originators underlines the fact that we are immersed in a candidate-driven market. But even the most optimistic headhunter is given to asking how much longer this can go on.

That there will, one day, be another recruitment crash reminiscent of 2002 is undeniable. Unfortunately, I have no crystal ball to predict when it will occur. City hiring cycles usually last five years - taking 2002 as the base year, this suggests we're in for a crash sometime soon. However, who's to say the cycle hasn't changed? Factors such as booming new financial centres (Russia and the Middle East) and the expanded role of new market participants such as hedge funds and private equity houses may well have elongated the cycle - it could be 2010 before we see the next crash. On the other hand, it could be tomorrow; cycles work with the value of hindsight which is why three analysts will have three differing views.

With the future so unclear, the more pertinent question is whether the landing will be hard or soft. I was recently quoted in the Financial Times as saying it would be soft - in fact I told the reporter the polar opposite: to my mind, a 'soft crash' is as much an oxymoron as a 'poor billionaire.'

Today's financial markets are far more robust than five years ago. The credit correlation crisis of Q2 2005, the current Bear Stearns hedge fund debacle, global energy spikes, sub-prime, today's bond surge and so on, have been blips that a decade ago would have brought the markets close to imploding - if not crashing - in the wake of an LTCM-like disaster.

But the fact that the markets pretty much took them in their stride should not lead one to presume that they're immune to crises. The operative word here is 'crises' rather than 'crisis'. New dynamics are in play today that have hitherto been absent from the world stage. The Middle East, China, Russia and India are developing platforms upon which they can assist global financial stability to settle. In the '80s and '90s a single major economy and their related financial market (be it Tokyo or NY) was able to rescue the world from a global crash. Today no single market could enjoy that responsibility. Similarly, no single crisis, I believe, could bring the market crashing down.

However, a combination of crises would certainly have a massive impact and therefore when a crash comes, I predict it will come hard. Were another Amaranth to occur simultaneously with a 9/11 sized attack on a major Saudi oilfield, a natural disaster (earthquake in Tokyo or West coast storm) and a stock market crash in China, the drop would be precipitous. None of these situations is unfeasible, and there are plenty of other combinations that could be the catalyst.

Nevertheless, it's not the events themselves that turn a crisis into a collapse so much as the resulting herd-like movement to unwind herd-like positions. The current comparative stability we enjoy is as much due to the absence of combined crises as it is to the sheer power of financial muscle to combat the single event. But I seriously doubt the ability of those muscles to underpin a market not only assaulted by a combined series of negative events, but by the stampede from risky investments made during calmer times that appear ill-considered with hindsight.

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