I listened to a replay of the MMC investor call this evening. What came through to me is that expense management will be key to earnings growth in the second half of the year. This is an extremely disciplined management that knows its financial objectives and has every intention of achieving them.
Taking the cue from Aon I see, where Greg Case is an expense management GURU. Cutting staff, expenses, margin on meals, no blackberries, no raises. Oh yes, expense management will do it. Hint: it works for a while, but only so much can be cut or managed.
MMC has been manging expenses very well since Glaser arrived. He is pretty cold blooded about how expenses have been managed. A number of lay-offs, no raises for the people who get the majority of the daily work done. Lots of people retiring and many more who can't wait to retire. And many many people who are looking for a more active job market to look for other work.
The real question, in the next six months, is that there are a number of expenses that the management cannot control. As responsible mangers, they really want to accrue expenses as they occur and not try to delay recognition. For example, the MMC pension in underfunded by around 15-20% which is lots less than at AON. But they will probably make provisions for payments on the pension obligations, which will cut into the profit margins.
I think these shares are close to fully valued right now. I would personally rather have my money in an ETF like VPU than in MMC.