Don’t be fooled by thin summer markets – the world has changed, markets no longer take August off. Yet, finance changes slowly – for all the talk about diversity it’s taking generations to change the mindset and sense of entitlement that underlies markets. Maybe a good shock will be no-bad-thing – but banks making statements about their diversity ambitions should be treated with suspicion.
So many things should be worrying about in markets this morning… but after last week’s V-shaped recovery, and the weekend storms clearing the sweltering high pressure, the mood in the City seems to be “let’s not be hasty and just go with the flow.” Afterall, “nothing ever happens in August”, does it…? (Rhetorical question…)
A classic summer mindset seems to have seized the markets: “no point worrying about stuff today we are only going to worry about tomorrow…”
Don’t be fooled. Under the calm surface there is an incredible amount of friction developing… The ducks may look serene, but they are paddling furiously… and the duck season is not that far off.
The stock market is telling us all is fine and dandy – it is not. Last Monday’s momentary slip – on half-baked inflation fears and the pandemic – reversed itself, apparently confirming the underlying strength, health, wealth, resilience and a dozen other false-friend words about the market. Let us not concern ourselves with the trivia: the shape of the yield curve, the thinking (or not) of central bankers, the real inflationary outlook, the money now rolling out of SPACs, the consequences of retail gaming the stock markets, or even how stupid do crypto-proponents look now.
Over a glass of fine wine at a dear friend’s long delayed wake we came to the conclusion one major reason stock markets are so high because too much money in financial markets is chasing so few assets – a factor compounded by monetary policies – and that its too dangerous for central banks to step back for bailing them.
Clearly money chasing money is a classic recipe for investors bidding ever higher. It’s destined to result in someone paying too much. Trying to guess when that point is past, and the mood is going to deflate is just a game… I asked people when they thought it might happen, but no one really knew, except its unlikely to happen now, in the middle of a thin summer market.
Hmm… don’t be fooled.
It might be nearly August, but if the market sincerely believes in stock-stability then it should remember the only reason markets shut for the summer was bankers tended to take August off to go shooting on their Scottish estates. Most of us don’t have estates any more… just mortgages, school fees and underfunded pensions. Yet the mindset persists that nothing can wrong in thin summer markets.
Never forget … the market has but one objective: to inflict the maximum amount of pain on the maximum number of participants. The received wisdom is that can’t happen when the market is on holiday… but what if it does? Stay vigilant.
In the meantime, all these valid financial questions about how wobbly markets should be will have to wait a moment while I divest myself of Santander shares… I am also considering the tale of two aged-50-something advertising executives who successfully sued after being sacked for criticising a new “diversity” director’s pledge to “obliterate” the firm’s reputation for being “full of white me”: Ad men sacked to improve gender pay gap win sex discrimination claim.
The Spanish bank intends to reward senior bankers based on diversity targets, progress on climate change, and “aligning their financial incentives with their corporate objectives.” All laudable goals – but is this is the same bank that remains a personal fiefdom of the Botín family? Where, until recently your position in the hierarchy was defined by the question: “Botín o Boton”? Translation roughly: are you a Botín or just a servant?
Santander is terribly progressive having Ana Patricia Botín as chairman (according to Forbes she is ranked 8th most powerful woman in the world… wow..), but she is also the 4th generation of her family running the family bank. I’m told (usually by bankers trying to court her) she is remarkably clever and a very good banker.
But strip out all the noise about Gender, Race and Diversity in the Woke/ESG agenda, and it boils down to equality. That includes equality of opportunity. I posit the question how do the opposing forces of Nepotism and Gender & Diversity align themselves in the new woke multiverse of business objectives?
Diversity is a damn good thing. When I joined the City in the 1980s I was the outsider – a rough spoken Scot from the wrong school and wrong university. The City then was dominated by public school boys with double barrelled names who never had to compete for their jobs. Over the years its changed – but the mindset has not really changed. The same ways of thinking, values and that overarching sense of entitlement is perpetuated by outsiders adopting the same values and think-set as the previous financial princes.
Finance still has to be democratised! Do so, and it will become more inventive and healthy.
At the moment there is still a smell of entitlement hanging like a bad odour over much of the City and particularly the quangos associated with it. When I meet the quango-ochracy I cant help but notice how smoothly many of them fit, their sense of entitlement… and how there may be more women, but all come from similar backgrounds, shared schools and are PLU (people like us!) Something needs to be shaken up.
Now… I have no reason to be particularly down on Santander except the outright foolishness of their diversity statement. Greater diversity in finance will improve markets. We need a much broader range of thinking and backgrounds to improve the financing response to climate change.
But, I take the view is any firm, be they in manufacturing, commerce or finance should be doing these things as a matter of course. When they have to state it out-loud, like Santander has just done – then it’s a clear signal something is significantly wrong, and it’s time for a grandiose gesture to camouflage the reality and reverse any negative perceptions.
It’s also a bit of a new headquarters moment… Whenever you see a Bank or Financial Institution embark on building a new grandiose Headquarters then you know it’s time to sell.. Which will be interesting as I am flying up to Edinburgh later this morning and will be having a good look at how the new headquarters of an investment firm I’ve put rather too much of my pension pot into is coming along… More on that later this week.
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