Roche bets all on crash call

PUBLISHED : Sunday, 05 April, 1998, 12:00am
UPDATED : Sunday, 05 April, 1998, 12:00am

DAVID Roche has finally come out and said it. The question is: Will he live to regret it? The former Morgan Stanley man, now president of his own operation, Independent Strategy, has demonstrated just what the first word of his company's name means by saying that global equity prices are set to crash 40 per cent this year.

Independent it may be - but if he gets this one wrong, it could haunt him until way after his alleged crash is done and dusted. We now have a vision of how Mr Roche will be described in years to come.

Option one: 'The man who called the crash of '98.' Option two: 'Who?' Readers of Mr Roche's report will hardly have been reassured by its beginning, which detailed how he got his last call wrong.

He had said markets would rally in the 'interregnum between the first and second halves of the crisis'. It took just 14 days for this to go up in smoke.

'Two weeks later and our view of markets is losing you money. We agonise about it,' he said.

He may have got this one wrong, but he is a member of a very select band of people who can claim to have seen the Asian economic crisis coming.

In the middle of last year, Mr Roche once again went out on a limb and said a devaluation in Thailand was not just likely it was a virtual certainty. As with most people, he failed to grasp the speed of the ensuing Asian contagion, but he did call it.

It is also worth remembering that Mr Roche has 'links' to George Soros, who seems to have been on the right side of the crisis so far, to the extent that Malaysian Prime Minister Dr Mahathir Mohamad even blamed him for it.

Unlike Mr Soros, Mr Roche is even welcomed into Dr Mahathir's household, having taken afternoon tea with the volatile leader while on a trip to the country.

All of this, of course, counts for little. This is a right or wrong call. Either there will be a crash or there will not.

Mr Roche has left himself no get-out clauses in this one, indicating he must be pretty sure about what he is saying.

He has, in effect, put his life savings on red.

So he gets 10 out of 10 for avoiding the herd mentality that corrupts other strategists and a Nobel Prize for the size of his cojones.

He may also be staring the biggest professional raspberry of his career in the face.

As he says himself: 'The glory of getting the emerging market crisis right is history.' But since when has glory been the motivating force of the financial industry? Its more traditional members still bash on about those things called returns, and if Mr Roche's clients take him at his word - and the word is wrong - then he may want to remember a phrase in which glory also plays a role: Death or glory.

But is there any death for strategists? They tend to make Lazarus-like recoveries from their former calls.

So Mr Roche has played his hand well. He will be remembered as the first to call the Crash of '98 if he is right, and if he is wrong, he will be pilloried for a while and then it will be time for someone else to make a fool of themselves.