ISQ - October 2021
Key Takeaways
The international climate summit COP26 is held in early November.
Discussions are focused on key issues over the next two or three decades.
Ageing global populations are set to have impacts on tax rates.
Challenges always bring opportunities too.
Following the light of the sun, we left the Old World
Christopher Columbus
This year, the first half of November may help progress a range of important initiatives for much longer than just the rest of this decade. The international climate summit COP26 will take place in Glasgow between Monday 1 November and Friday 12 November and there is much to discuss. After all – as noted by the U.K. government recently – COP26 may be our last ‘best hope for the world to come together and tackle climate change’, beyond hopes already forged at the 2015 Paris Agreement.
However, the world has already evolved in many ways over the last six years with the growing global influence of emerging market nations – even given the COVID-19 crisis. This alone can make discussions more challenging for a world where rising global emissions are already expected to breach the Paris agreement temperature target, namely restricting a rise in temperature to 1.5C by halving carbon dioxide emissions by 2030. Whilst the convergence of a ‘movement of movements’ is building, it is difficult to have truly global applications, given that developed market nations cannot easily criticise the very same economic growth engines that they applied themselves over recent decades. Fortunately, periods of change and new insights are applied all the more quickly. Acknowledgement of this alone would allow discussions in Glasgow to have some real impacts over the next two or three decades, something that financial markets might find comfort in.
But what about current energy price concerns, not just in the U.K. despite the rise of both wind and solar power solutions? ‘Green’ energy focus by the end of the next decade and hitting net zero emission by 2050 remain far more consistent with continued nuclear energy than gas and coal in particular. As always change occurs over time.
Global populations are due to change in other ways over the next couple of decades. The growing number of older people is a cause for real celebration, but it does also mean heightened healthcare challenges while also having implications for governments’ taxation requirements. For most developed market countries over the next twenty years, it would suggest a 5-10% proportional GDP increase to meet the tax bill. Whilst countries such as Germany and Japan have been particularly forward-looking by focusing on long-term solutions to cope with the demands that come with an ageing population, avoiding higher taxation levels becomes more difficult. Meanwhile, even in the emerging markets, China’s ageing population problem continues to cause economic concerns (providing a justification for the country’s government to focus more on ‘common prosperity’ efforts for all business sectors). As shown by smaller family norms in the developed markets, China’s extension of its two-child policy to three children is unlikely to have much of an effect.
The real key for all countries around the world remains to embrace change.
The real key for all countries around the world remains embracing change. Whilst jobs in some sectors are changing due to an evolving world centred on more technology, the highest job creation numbers will come in areas impacted by home health and personal care. So whilst proportional taxation levels are likely to rise, it is not all about the consequence of heightened government borrowing levels over the last decade.
For investors, it is always a world of change, even beyond the steady rise, during the 2020s, of Generation X and Millennial investors compared to Baby Boomers. It will certainly make careful stock-picking more relevant as already highlighted so far in global markets in 2021. Challenges always bring opportunities too. It would be more of a worry if climate change, ageing populations and government debt levels were not major points of discussion. Life, business and financial markets are all always a trade-off. Whilst there may not always be solutions, there are always opportunities to improve (and invest).
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Black MondayOn 19 October 1987, the stock markets experienced a dramatic plunge that prompted many firms to shut down their trading desks and turn off their phones to minimize internal losses. Raymond James refused to do the same. Our desks stayed open to help meet clients’ needs, resulting in our first and only unprofitable quarter since the firm went public in 1983. |
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Who was Raymond James?The Raymond in our name is actually from Edward Raymond, owner of a 15-employee mutual fund sales group, Raymond and Associates, along Florida’s west coast. He sold his company to Bob James on 15 July 1964, on condition that the surviving firm be called Raymond, James & Associates. Three days after the sale, Ed Raymond was involved in a near-fatal automobile accident and never joined the firm. Nonetheless, even after Raymond had passed away, Bob James insisted that his name remain on the door – ahead of James’ own. That was a promise he made to Ed Raymond three days before the accident, and Bob James was a man who kept his promises. |
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Bear Market of 1974The severe bear market of 1974 threatened the existence of Raymond James, which was bleeding capital by the day. Tom James, his father and other leaders took extreme measures to keep the firm afloat, slashing costs, foregoing paychecks and even attempting to sell the firm for just enough capital to protect client assets and retain as many associates as possible. The story could have ended very differently if not for a sharp upturn and continued rebound in the stock markets late in the year. |
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Taking Raymond James PublicWhen consideration was being given to taking Raymond James public, Tom James penned a letter to shareholders (largely employees at the time). ” … the public offering should be considered as a statement of our independence. While this is a psychological rather than an economic rationale, it is nonetheless very important. We have asserted for some time that we are not interested in becoming a small part of a very large corporation. That assertion results mainly from the inclinations of management rather than the economic benefits associated with either alternative. The public stock offering affords us the opportunity to enjoy a little bit of the best of both worlds. While shareholders will be given liquidity at fair market value, we will still have the ability to control our own destiny.” After 40+ years of Tom’s leadership, upon becoming CEO, Paul Reilly was often questioned about whether the company might ultimately surrender its cherished independence and be acquired by some larger entity. His response: “Not while I’m around.” It’s a theme that continues today. |
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