THE FRIDAY INTERVIEW/ Brian Weber Citi Quilter: Brian Weber recently found himself rereading The Great Crash, the 1954 bestseller by economist JK Galbraith which describes the famous Wall Street meltdown of stock prices in 1929 and how markets progressively become decoupled from reality in a speculative boom.

Given the turmoil in the Irish market last year, the executive director of investment management company Citi Quilter says the book should be essential reading for anybody buying and selling shares. "It talks about the great crash in 1929 and the extent of overleverage that was knocking around in that period of time," he says.

"There are huge lessons. People did silly things with money they borrowed and . . . then the asset prices collapsed. That led on to the Great Depression.

"The SEC [US Securities and Exchange Commission] came in at the time with a lot of regulations, one of which incidentally was the level of leverage you could use to trade securities and that prohibited the use of contracts for difference (CFDs) in the US. It amazes me now that US firms are coming into Ireland promoting contracts for difference when they can't do it in their own country."

Citi Quilter came into existence in 2003 when eight private clients staff left Davy stockbrokers to set up what is primarily a bespoke investment management service for high net-worth clients. It specialises in investment management in securities markets, and all of its portfolios are internationally diversified.

Despite early concerns in stockbroking circles about the firm's ability to survive, it has thrived. Weber attributes this to its international focus and an ethos of putting the client first.

"There was plenty of cynicism around what we were trying to do," says Weber. "We have diversified internationally and that competitive advantage was borne out last year hugely, given the performance of the Irish market."

The use of CFDs - derivative products that are traded and which allow investors to profit from changes in the prices of stocks - gained a lot of attention in 2007 as the Irish Stock Exchange endured a torrid time.

While Weber says he does not blame CFDs for the underperformance of the market, he says they contributed enormously to its downward spiral. He says their use as a speculative instrument is questionable and recent evidence of the losses by private clients supports this view.

CFDs have proved to be popular among investors in recent years because they are traded on leverage and the leverage is typically 10 to one. However, Weber believes they are not appropriate for private clients, "full stop".

"If you use 10-fold leverage on an individual stock and then you include your costs, probably a 7 per cent decline in the share price will result in you losing all of your capital. That is just unacceptable," he says.

"The unfortunate part of it is that the collateral damage for the rest of the industry is quite significant because stockbrokers and investment managers get the reputation of having flung it around a bit because of the activities of a small few."

Nevertheless, Weber stops short of calling for regulation similar to that in the US that would limit or prohibit the use of CFDs.

"To bring in regulation to change something just to stop a small few ends up penalising most people who have done things properly," he says.

In any event, the carnage endured by many investors through the use of CFDs should see them fall out of favour, Weber argues. "I would make the brave prediction that the CFD market here is over for the foreseeable future because people have lost so much money."

However, Weber says he was more than a little irritated by the Revenue Commissioners' climbdown in 2006 on extending stamp duty to CFDs. "You had a tax exemption, ie, no stamp duty, in trading CFDs for people who were short-term speculators, whereas people who were long-term investors had to pay stamp duty."

While Citi Quilter has not been immune to the weakness in the domestic stock market, Weber says its international diversification has meant it has escaped the worst of the turmoil. He also argues that good value can now be found in the Irish market.

"We have actually increased our weighting in the Iseq as a result of the sell-off," he says.

"Now, there is a bit of an act of faith in that because you know that property and construction could still suffer for a while, but we think the market is overdone in selling."

Somewhat ominously, however, Weber forecasts that the Irish property market could be facing the same experience that the Iseq suffered last year. The underlying issue is leverage with the high levels of debt that are in place, he says.

"There are lots of people holding properties with high levels of debt. People who hold assets with high levels of debt are the most vulnerable in an economic downturn and we have seen that happen already in the stock market, and my view is that it doesn't bode well for the property market this year because of the levels of debt that are there.

"I think it will struggle. I just can't see any positive signs there just yet. I don't predict a crash but the downward trends will continue and that's because some of the heavily leveraged players will have to be taken out, as they were taken out in the stock market."

The spectre of a large property developer going to the wall is the last thing needed in an economy which many say is slowing dramatically, but Weber argues that the Irish economy is still in good shape. In much the same way that the economy survived the dotcom demise, it has the ability to withstand the construction slowdown, he says.

"It might be a little more severe because construction is slightly bigger than the dotcom thing was. I still think the rest of the economy is in fine shape. There will be a knock-on effect from a slowdown in construction but it's not the end of the world."

The great unknown will be the effect of international trends, particularly the effect of the credit crunch on the global economy.

But Weber expects the credit crunch to work its way out of the system over the coming year. "In terms of valuations and write-offs, we are well down the road in terms of discounting all the bad news that is coming and some people fail to see that."

More importantly, Weber says the lessons have been learnt. "The bankers . . . are starting to be more prudent about how they are going to lend money and I think that is a long-term structural change and it means there is less frothiness."

ON THE RECORD

Name: Brian Weber

Company: Executive director, head of the Dublin branch of Citi Quilter, a bespoke investment management service for high net-worth clients.

Age: 45

Family: Married to Yvonne, with five children.

Background: Was a director with Davy stockbrokers before joining Citi Quilter. Also spent eight years with Goodbody Stockbrokers. Has a degree in business from Trinity College Dublin.

Hobbies: Mountain biking, 10km runs, "social" golf.

Something you might expect: He is president of the Securities and Investment Institute, a training and membership body for the securities and investment industry, but he will be stepping down this year.

Something that might surprise: As a student, he worked part-time in a bookmakers.