There May Be Trouble Ahead

The Financial Times  –  19 Sept 2008

Absolute unremitting panic smattered with deep, dark depression currently seems to be the order of the day in the City. I have spent a morning calling up various ex-clients and ex-colleagues of mine and can say with absolutely no doubt that I never once witnessed such a horrifying air of despondence during my 12 year City career. No-one seems to believe that things could have got this out of control this quickly especially when over the last months there appeared to be some ‘green shoots of recovery’. I have heard one equity salesman talking of ‘the system potentially grinding to a halt over the next couple of weeks’ whilst an ex-colleague talked of a potential ‘total meltdown of the system.’ Fear is overpowering greed with consummate ease and the herd mentality is proving as strong as ever. Previously high-powered ‘masters of the universe’ are looking on bewildered and powerless whilst former ‘big swinging dicks’ appear to have entered such cold water that their gender has now become unclear! I sit back at my house observing all this with somewhat equivocal feelings. I know that the actions of certain greedy Cityboys brought this catastrophe about and that to some extent this financial turmoil is just ‘chickens coming to roost’ after years of reckless gambling with other people’s money. I’m also aware that what we’re witnessing is a genuine human tragedy that will have far-reaching implications for families across Britain and indeed the world.

My discussions with my ex-peers suggest that there are three main reactions that this crisis has engendered in those City types who have been fortunate enough to have not yet lost their jobs. There’s the ‘startled rabbit’ approach. This involves completely avoiding making any decisions whatsoever until the dust settles. I spoke to a middle-ranking hedge fund manger who quite simply told me that he was going to sit on his hands, neither taking any long positions or any short ones. He felt that the uncertainty was so massive that he could not make any informed decisions and that investing now would be ‘like entering casino and putting all my chips on black’. Then there’s the ‘Nick Leeson’ response. This involves betting the house with a devil may care attitude believing that the extreme volatility we’re experiencing can result in massive profits. If you’re unsure whether you’re going to have a job next year (or indeed capitalism will still be functioning!) then some are inclined to double up whilst they still can. Few people I’ve spoken to have admitted to doing this themselves but they have told me stories about propriety traders and hedge fund managers who have exhibited this tendency. The final response is what I call the ‘fiddling Nero strategy’. Although potential job losses may make certain automatons spend extra hours in the office (and leave their jacket over their chair when they do eventually leave) in a desperate attempt to curry favour with their bosses other more fatalistic workers think that if the writing’s on the wall then the pub is the best place to drown one’s sorrows and observe the chaos.

I was in a City bar on Wednesday at 5.30pm and it was almost completely full. I happened to know several of the hard-drinking folk inside who were from a bank currently involved in a merger and who saw no point in pretending to work hard when the P45 seemed inevitable. However, I also found out that many were there for a leaving drinks hosted by a senior salesman and they hoped that he might be able to find them a job at his new place of employment. As one broker quipped ‘for some reason it’s the best attended leaving drinks I’ve ever been to!’

What advice can I give to people in the City at the moment as banks crash, merge and reign in their spending? Firstly, ring that head hunter immediately. They may be inundated with calls at the moment but better to be on their lists than not. Secondly, network like it’s going out of fashion. Obviously, brown nose the boss even more than normal but also think of all your friends, clients and ex-colleagues and whether there are opportunities at their firms. Thirdly, reduce your spending and make your spouse does the same. Even, if you do manage to retain your job I suspect bonuses will be down at least 30-40% this year. This isn’t just because profits will be down so much but because those nasty bosses will only pay you as little as they can get away with and the old trick of threatening to move to a different firm doesn’t cut the mustard when there is such a glut of City people seeking jobs and fewer banks to employ them.

But my main piece of advice is this: this could be a blessing in disguise. I don’t know many City workers who love their stressful, competitive jobs with their hideously long hours. The City sucks up this country’s talented people such are the disproportionately massive rewards that it offers. Perhaps some of these smart cookies may be forced to review their life choice and may end up choosing to use their talents to do something more enjoyable, fulfilling and, dare I say it, worthwhile.

Thoughts ?

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