Cityboy, What exactly is risk/reward?
Hell's teeth! It certainly is a rather sorry state of affairs when a Cityboy hasn't grasped this most basic of concepts because it dictates every aspect of finance. For example, the perceived risk of default will explain why one ten-year bond yields 5% and another yields 3%. Similarly, two companies with comparable growth profiles can actually have vastly different PE ratios because the market views one earnings stream as more risky than the other.
Indeed, every single investment decision you ever make (which pension, house, mistress, etc) should take into account the 'opportunity cost of capital', e.g: what return your dosh could make were it to be invested in a different asset with a similar risk profile. The assumption that rational people make this calculation on a daily basis is at the heart of the conviction that only the 'invisible hand' of the free market results in an efficient allocation of resources.
Of course, this conviction is utter balderdash – as revealed when tech stocks were trading on forward PEs of 500 on earnings they'd never make, or CDOs were deemed to be as secure as Gilts. However, it's probably best not to mention this to colleagues who will invariably deem you a commie, strip off your clothes and mercilessly chase you around Broadgate Circle with a cattle prod.
Help! I'm terrified of public speaking but have been asked to play a role in a corporate presentation…
Well, the good news is that you're not alone on this one. One study has suggested that the amount of adrenaline coursing around the body of a newish actor just before he or she takes to the stage is similar to that experienced by a soldier just before going 'over the top' in the first world war.
Personally, I have always despised public speaking and when I was a banker I had some disastrous experiences – including the notorious time blood gushed out of one of my nostrils while addressing the entire trading floor (causing some of my more amusing colleagues to call me 'Keef' for years after). Yet, despite my intense 'glossophobia' I now occasionally deliver after-dinner speeches… provided, of course, that the 'monetary inducement' is sufficiently persuasive for me to do so.
I would remember the following points: 1) Learn your beginning and end off by heart. 2) Pause a few seconds before starting. 3) Talk as slowly as your poor nerves can take. 4) Print the whole presentation out but underline key words in red. 5) Read your entire presentation aloud at least five times before delivering. 6) Imagine every member of the audience is dressed in a leather gimp suit.
Do all that and by the time you're finished they'll think you're the bastard son of Winston Churchill and Hillary Clinton.
Are all bankers on cocaine?
It's a fair question – especially if you've read certain salacious City books that claim to expose the terrible drug culture that lies at the heart of the Square Mile. (Ahem.)
Gianluca Vialli is, of course, the drug of choice for the discerning Cityboy/girl. For a start, like Stella Artois, it is 'reassuringly expensive' and this gives it that 'glamorous' cache that always gets Cityboys hot under the collar. More importantly, it prolongs your ability to booze while being out of your system within a few days (unlike ecstasy or acid). It replicates the buzz you get from the trading floor and generally leads to delusions of grandeur and aggressive, boorish behaviour – all of which help Cityboys fulfil their fiduciary duties at the traditional Thursday-night knees-up.
Having said that, there has been a sea of change in behaviour since the financial crisis. Job insecurity and increased professionalism mean that the days when memos had to be sent around telling people to only snort cocaine in the toilets and not from off their desks (as apparently happened at one brokerage in the late 1980s) are now well and truly over.
Do you have any questions for Professor Cityboy? Email them to letters@squaremile.com. Follow him on Twitter: @cityboylondon
