I’ve been meaning to write something about the trials and tribulations of recent life in the markets for some time now.
But every time I begin to put pen to paper, I realise that I'm in serious danger of coming over all bitter and twisted - and I do appreciate that I’m one of the lucky guys that have stuck around the bond market - sometimes by my fingertips - for nigh on 30 years. The potential for bitterness, however, simply comes with the realisation is that the game has changed during this latest big squeeze, and while the dogs may bark, the caravan moves on.
Yesterday’s HITC reader’s piece about the lack of bonuses, and living under the threat of redundancy, proved the catalyst for me to put something down. This fellow City worker was moaning about the stresses he has endured for the last four years. All I can say is try putting up with it for 30 years, mate, coz it goes with the territory!
You see the problem with markets is that they are never perfect. It’s a system that took centuries to evolve. Today’s actions by central banks to ease the financial system has resulted in far lower rates, squeezed credit spreads and decimated volumes and volatility - all the things you need to make an honest buck.
It gets worse. Take a firm like HSBC, with 250,000 employees globally. But guess how many risk and compliance officers they have globally ? Around 25,000! Dramatic proof of the changing regulatory environment in which risk is frowned upon - you can’t go to get a sandwich without informing someone. All of this costs money and reduces risk appetite and potential profits.
So we come to the thorny question of bonuses and what we refer to somewhat ironically as ‘bums on seats’. A CEO of a London based investment bank was asking me what the point of his sales force was, since each member would have to earn at least $2 million to remain profitable. Of course they’d never make such a ridiculous target given market conditions, so I suggested he stop whingeing and fire them all, or just accept that you need people to face investors and the street.
In the end he had to agree that closing down businesses often costs you a lot more in the end, since it’s so darned expensive to rehire people (usually at the market highs), not to mention all the lost goodwill and traction. So it’s become a game of chicken, where everyone is waiting for something to give. However, in this environment what employer really wants to shell out big bucks at the end of the year ? You should be happy just to have the day job, and look at it as an option on better times to come.
But if our bitter reader is sick of living under a cloud, just look at the alternatives. A good friend of mine - who is a well-known journalist - tells me he has often lived under the threat of redundancy, and he makes the point that he’s always envied me for my bank balance. The fact is that so-called creative professions also have political and market risk - and they don't get anywhere close to the financial rewards we occasionally reap. So hang in there,buddy - it is what it is!