CEDRIC: Well, here we are, at last the article you’ve been waiting for so, happy reading.
How the Financial World Thinks. An article by The Financial Advisor:
There are many worlds in the world, so to speak. Each having its own people; its own system and its own thinking. It sometimes occurs that a person living in one of these worlds can come to regard those who live in another as being really just a bunch of phonies. For a person in the military, for example, to consider those in the world of fashion as being a lot of layabouts; making fortunes by sitting on their backsides and stitching bits of cloth together. Seriously. It should hardly need to be said that it's not quite as easy as that.
But in the public imagination, fantasy often holds more sway than reality. To some, poets are all sycophants; those, in the corridors of power, despots; in the media, perverts. There are even a few, probably very few these days, convinced that office workers are really just embezzlers.
More than most others, the financial world has received a very bad press in this way. What are those deeply involved with financial matters, if not cynical, money-grabbing (or even 'grubbing') Ebenezer Scrooges? Disdainful of the interests of others and dead to all that's regarded as noble in human nature.
Okay, so another viewpoint has always accompanied this. That they are hard-headed, if still somewhat cynical, traditionalists. They are easy to spot if you venture near the vicinities of any stock exchange. They gather in small groups on the street corners; not a man jack of them under sixty. Black suits, are their garb, with silver locks protruding from beneath black hats. Wearing pocket watches, cravats, waistcoats and gaiters, if it kills them. All, more or less, resembling those faded photos of Charles Darwin, in his later years. And if there are any women amongst them, what kind of incredible creatures are they likely to be? Dour faced with heavy dresses; extending right down to their invisible shoes. Enormous hats; probably festooned with ornamental fruit and, one might suspect, with caste iron rulers, hidden away, to administer a sharp rap to any who might proffer an over intimate suggestion.
This viewpoint, of course, is no truer than the previous. But an interesting consideration has been raised. I mentioned two viewpoints. This is interesting because the financial world does have a kind of double identity. It has a 'providential' (this word, by the way, relates to ‘provide’ rather than ‘providence’) and, not to be the first to coin the phrase, 'risk' sphere. The providential, is the one that approaches the nearest, mis-conjectures apart, to the traditionalist idea. This is the area where organizations and an innumerable multitude of well-to-do individuals invest their savings. Into such things as: corporate bonds; gilt-edges; OEICS; ISAS, etc, etc and hopefully, the transitions of circumstances being equal, wisely so. But the providential sphere is an, if worthy, nevertheless, lumbering and not very exciting, triceratops of a thing. Ever fortifying itself against the never far distant tyrannosaurus rex of economic disaster. It is rather to the mentality of the risk sphere that I chiefly shall be referring when I discuss the thinking of the financial world in this article.
It is maintained that, theoretically speaking at least, a person who owns shares in a company, actually owns a portion of that company. But I think it needs to be stated that the vast majority of investors, are not even interested in this notion, let alone take it seriously. By investors, I'm not just referring to such as day traders; who not only obviously don't but, realistically speaking, couldn't even possibly do so. But to the majority of risk-orientated investors in general. Investors aren't concerned with all the machinations, foibles and quasi-aspirations of the companies they invest in. They don't care about whatever sense, or nonsense, is discussed in their board meetings (now for Pete's sake). Most don't bother to attend those annual share-holder meetings; and if they do it's usually only as an excuse for a day out. They don't bother to vote on company policy, not even by proxy. All they are interested in is whether the shares go up or down. If a company, they've invested in, starts to flounder they're out of there like a shot. That indicates just how much they consider they actually own a portion of it. And whoever heard of any investor voluntarily washing down, or painting, that percentage of a company’s walls, that they considered they had a right to call their own? Or of an investor walking into a boardroom, during a meeting, and walzing off with a picture or chair that had taken their fancy? Only marginally can the financial world be compared to a sort of academic school system. Which seems always to be holding meetings; taking votes of confidence, etc? It only resembles such forms in pretentious arrangement, whilst, really, having little actual concern with any such procedure. It has been known, that some companies, which are run by families, nevertheless, float shares on the market. Even though they have not gone public and allow their shareholders none of the usual amenities, such as voting rights, etc. Do the shareholders worry over the absence of these customary benefits? In most cases it tends to be apparent that so long as the investments are rising, or at least stable, it doesn’t seem to discourage them in the least.
But to continue, the financial world likes things to be as quiet as a mouse. 'As quiet as a mouse!!!' Some readers might reiterate in amazement. 'Surely you MUST be joking?' Perhaps they are thinking of those shots of stock exchange floors, with scores of placers, bawling their heads off and gesticulating like mad. They might even be thinking of how the first stock exchange came into being. After all the brokers, in 1760, were ejected from the Royal Exchange for, to be emphasised, 'making too much noise'. To develop this point further for a moment, I doubt if it was because they were making too much noise. I would speculate that it was far more likely to be because the Royal Exchange was fed up of trying to constantly keep track, as they were liable to do, of all their perpetual ins' outs' and windings about. Particularly as the South Sea Bubble had burst only forty years before; causing many forms of investing to be castigated or even banned. If they failed to detect any such illegal activities, they might be held as much responsible as the brokers themselves. So they preferred to just evict them and leave them to make out, or not make out, by themselves. Either way they would no longer be the problem of the Royal Exchange.
But anyway, I reaffirm that phrase: 'The financial world likes everything to be as quiet as a mouse'. Anything that makes a BANG! Any kind of a bang, terrifies it. Neither can it be reassured. In a realm where duplicity is almost commonplace, it's of no use someone saying that 'everything’s all right'. Or even that 'everything’s all right now'. The investor’s response is: 'What do you mean everything’s all right? Why shouldn't it be all right?' And if some company starts having one of those 'management reshuffles' (in inverted commas), the investors are at least dubious. They've no way of knowing what it really means. So down go the shares. However, if, after a few weeks, nothing much happens; they start to reconsider. A bit like those frogs, in the Aesop fable, which, when the log landed in the water, went belting over to the margins of the pool. After a while, they plucked up the courage to peep out between the reeds. There was nothing there but a log; it didn't move; it didn't pose any sort of threat; what was all the fuss about? So the shares begin to rise again. But then, if this new management start 'doing things' (in inverted commas again). Usually, by the way, they do for the, I suppose inevitable reason, that they want to prove they’re worth their weight on earth to those who put them there in the first place
But, anyway, again the investors are dubious, if not actually terrified and again the shares start to plummet. If there's anything worse, in the minds of investors, than a board that 'does things', it's one that tries to do things that have never been done before.
This leads on to another point, the financial world is no place to introduce startling new innovations. Okay, so let’s say that you’ve invented a new ploughing device, and you also happen to know farmer Giles. So you might pat farmer Giles on the shoulder and, because he knows you, he may be prepared to trust your device on mere recommendation. But the vast majority of people in the financial world don’t know you, anymore than you know them and therefore, in general, it would be regarded as not just inadvisable but possibly not even sane to take a chance on something unverified by experience.
Don’t regard this as implying that financial people are not farsighted; they’re as farsighted as most, it’s just that they have no motive for being concerned with things that are not going to be valid in their time. If you had recently acquired a new property, it would be no use (unless of course you were joking) saying to a plumber or electrician, that in twenty years time you would probably have some business for them, and neither do financial people have any concern, in their deliberations, with what is only likely to be relevant in the quite distant future.
Investing. Of course, is a matter that should always be approached with extreme caution. Remember the risks that are involved and the dangers that are ever waiting to overwhelm the unwary.
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