Dear ATCA Colleagues

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

Thank you for your outstanding input to the Socratic dialogue in regard to the unfolding credit crisis and global financial turbulence within ATCA and without. One of the major inquiry subjects coming back from central bankers, G10 governments, regulators, as well as major financial institutions -- banks, insurance and reinsurance companies, mutual funds, large private equity players and hedge funds -- which now needs to be presented is as follows:

What will life be like without trust in credit rating agencies or is it even possible?

Beyond the primary query, the key questions that need to be asked are:

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On Friday, 10th August 2007, The ATCA Editorial Team wrote:

The European Central Bank was galvanised into action on Thursday to head off a potential financial crisis by pumping an emergency Euro 95 billion into the region's banking system after liquidity in the interbank market started to dry up, threatening banks' access to short-term funds. This prudent pre-emptive step to head off any possibility of liquidity problems, came as BNP Paribas, one of the largest banks in Europe, froze access -- halted withdrawals -- to three funds, which has been seen as a major disturbance in the financial markets. BNP Paribas said it had acted to forestall forced liquidation of assets in a disorderly market where almost all bids had dried up. "The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating," it said. Just over a week ago, Baudouin Prot, Chief Executive, BNP Paribas, said the bank had only minimal exposure to the US sub-prime problems.

We are grateful to the following components of the "Credit Crisis" Socratic dialogue thus far which cover credit rating agencies within their overall perspective:

. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Public Inquisition of Credit Rating Agencies may Accelerate Downturn;"
. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "The Asymmetric Loss of Trust and Chain Reaction;"
. Hervé de Carmoy, European Vice-Chairman, Trilateral Commission, based in Paris, France, for "Role of Large Financial Institutions in Fuelling Crisis;"
. Dr Jim Walker, Chief Economist, CLSA, based in Hong Kong, China, for "China Chaos and Subprime Butterfly;"
. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Systemic Risk & Sectoral Meltdown: Heightened Correlation and Deleveraging;"
. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Prolonged Credit Market Correction Ahead;"
. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Contagion and Systemic Risk? ECB Injects Record Euro 95bn post Major Disturbance;"
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Resilience of Corporate Profits; Human Factor, Geo-Politics and Central Banks; Pride Before the Fall

We are grateful to:

. Peter Tasker, Founding Partner, Arcus Investment, based in Tokyo, Japan, for "Resilience of Corporate Profits & Sub-Prime Fiasco -- Global View from Japan;"
. Daniel Morler, Head of Middle East, LGT Private Bank, based in Vaduz, Liechtenstein, for "Human Factor, Information Lag, Geo-Politics and Central Banks"; and
. Justin Urquhart Stewart, Director, Seven Investment Management, London, UK, for "Pride Before the Fall -- Those Who Don't Know that they Don't Know;"

Dear DK and Colleagues

Re: Resilience of Corporate Profits & Sub-Prime Fiasco -- Global View from Japan

A useful rule of thumb in the world of investment is "if you're going to panic, panic early." The sub-prime fiasco has been dominating headlines for many weeks now, so the first order effects should be well discounted in financial markets. What conclusions can be drawn at this juncture?

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Best regards

Peter Tasker

Peter Tasker is a founding partner of Arcus Investment, established in 1998, an investment company specialising in Japanese securities. He moved to Tokyo in early 1983 to become financial analyst for Dresdner Kleinwort, and was voted top market analyst by Japanese investors for five years in a row. A graduate of Balliol College, University of Oxford, Peter has been working in the Japanese financial markets for the past twenty five years. He is also a director of Paris Miki since 2000, Japan's largest optical ware retailer. Mr Tasker is a widely respected political and financial commentator and has contributed articles to Newsweek, The Financial Times, The Economist, The Independent, The Asian Wall Street Journal and The New Statesman, amongst others. He is the author of numerous fictional and non-fictional books, generally with a Japanese theme. His first book on Japanese culture, Inside Japan, was published in 1987. He continued writing non-fiction books until 1992, when his first fiction novel, Silent Thunder, was published to rave reviews. He followed-up with the much acclaimed Buddha Kiss in 1997 and Samurai Boogie in 1999. He has often been compared to Elmore Leonard and Tom Clancy and he has been praised as "one of the smartest writers in the genre" by Publishers Weekly.
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Dear DK and Colleagues

Re: Human Factor, Geo-Politics and Central Banks

I share Al McDonald's perception of the "human factor", and I may add that this is in particular true for the much demonised Hedge Funds, some of which fared much better than equities and fixed income during the recent turbulences.

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Best wishes

Daniel Morler

Daniel Morler is Head of Middle East on the Executive Board of LGT Private Banking Asia and of the Middle East Product Committee of LGT Group, the private bank and asset management firm of His Serene Highness The Prince of Liechtenstein. Before joining LGT, first as Head of the Trust Department, and since 2003 in his present capacity, he had been the Head of the ICQM (Institute for Compliance and Quality Management), a self-regulatory organisation set up with advisors from the UK and US in order to implement the FATF (Financial Action Task Force on Money Laundering) due diligence recommendations in Liechtenstein. He is a trained lawyer, Member of the German Bar and of Lincoln's Inn in England, who has acted as Liechtenstein Counsel for London law firms. Daniel Morler with MEC International, based in London, has initiated the Arab Financial Forum, where he and Ian Walker are Executive Directors and Sir Roger Tomkys and Ambassador Dr Abdulla Bishara are Co-Chairmen.
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Dear DK and Colleagues

Re: Pride Before the Fall -- Those Who Don't Know that they Don't Know

Only a few weeks ago, and quite justifiably, some of the attitudes and behaviour of certain investment participants could have been described as arrogant -- they were hugely successful as they headed off for their summer holidays, basking in the knowledge that they had made all the right investment decisions. The rest of us were mere mortals who hadn't been able to divine or find the elixir of, well if not life, then at least the secret of investment success. Those who didn't understand the intricacies of portfolios run by magic black boxes with indecipherable formulae and exotic algorithms were probably just not worth talking to. Funnily enough, I haven't seen many of the most patronising ones recently but I suspect they may well have changed their tune by the time they return from Tuscany.

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Have a good week

Justin Urquhart Stewart

Justin Urquhart Stewart is a Co-Founder and Director of Seven Investment Management based in in Mayfair, London. Having trained as a barrister, Justin took up corporate finance, working in both Africa and Singapore. He then went into marketing with a focus on corporate cash management facilities. This led him to help found Broker Services in 1986, which went on to become Barclays Stockbrokers, where he was Marketing Director. In early 2001, he co-founded Seven Investment Management, an investment management business that innovated the UK investment market with the introduction of the first Sterling Investment Wrap Account which now manages and administers in excess of GBP 1.6 billion on behalf of professional financial wealth managers and intermediaries. Justin has a keen interest in developing the investment market to break down as many of the traditional barriers as possible for both private investors and smaller companies. He writes regularly for national magazines and newspapers, and is a frequent commentator on television and radio, both in the UK and abroad.

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