Juggling Dynamite

A new StatsCan report looked at some 10,100 companies conducting business in Canada – publicly traded and private corporations, along with government business enterprises such as Canada Post – and found overall that just 18.1% of director seats were held by women in 2017;  61.2% had zero women, 27.7% had one female director and just 11.1% had more than one.

Starting in 2015, the Ontario Securities Commission required companies listed on the Toronto Stock Exchange to disclose the number and proportion of women on their boards, among other requirements. The percentage of women being appointed as new directors at Canada’s 100 largest companies by revenue actually slowed to 30% in 2018 from 40% in 2014-2017.

This is not from a lack of qualified female candidates. Thousands of smart, educated women have been certified as board candidates by the Institute for Corporate Directors and are trying to find an opening.  Consciously or not, male-dominated boards are not making effective efforts to add them.

Not only is the status quo indefensible, but research published in the Journal of Empirical Science suggests it is also detrimental for business, sustainability and risk management. See Why female board representation matters:  The role of female directors in reducing male CEO overconfidence.

As reported in the Harvard Business Review female board members help to temper the overconfidence of male CEOs and improve overall decision making for the company:

One benefit of having female directors on the board is a greater diversity of viewpoints, which is purported to improve the quality of board deliberations, especially when complex issues are involved, because different perspectives can increase the amount of information available. At the same time, research has found that female directors tend to be less conformist and more likely to express their independent views than male directors because they do not belong to old-boy networks. So a board with female directors might be more likely to challenge the CEO and push him to consider a wider range of options, as well as pros and cons, when making strategic firm decisions. This could then attenuate CEO overconfidence and correct for potentially biased beliefs.

Scott Minerd, Guggenheim Partners co-founder and Guggenheim Global chief investment officer, discusses his concerns about rallying asset prices.  Here is a direct video link.

It is rare to hear financial establishment heads admit the truth about the present market cycle.  As we consider Scott Minerd’s comments, it is important to appreciate what Ponzi schemes are and how they must end. Here’s a classic definition courtesy of Investopedia:

“A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for early investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. Both Ponzi schemes and pyramid schemes eventually bottom out when the flood of new investors dries up and there isn’t enough money to go around. At that point, the schemes unravel.”

Ponzi schemes are a mirage, they are not investing, and participants are not smart or savvy, they are victims.  At the same time, their greed, wishful thinking and willful blindness make Ponzi victims complicit in their own demise.

Those holding savings in stocks and corporate bonds, or ETFs and mutual funds of them today, are not in ‘different’ or more ‘conservative’ markets.  They are in the largest ‘Ponzi’ scheme of all time.  Eyes wide open.

A slowing global economy with record debt, levered speculators and irrationally valued corporate securities make the world extra vulnerable to negative shocks that inevitably come in the form of trade wars, catastrophic weather events, disasters, war, terrorism and pandemics.  Today, we have all of the above in the mix.

Importantly, this is all happening within larger secular forces of falling birth rates, an aging population, mean-reverting debt and corporate profits (lower), tax rates (higher), financialization, central bank powers and globalization (all receding), and creative destruction of status quo systems and beliefs.  The world in 2030 is likely to look dramatically different than the world in 2020.  Those who can see, anticipate and adapt to the changes afoot can survive and thrive in this period, those who don’t are likely to suffer.

Historian Neil Howe explains present conditions are typical of a ‘fourth turning’ period likely to continue over the next decade.  Although ‘winter’ periods are volatile and disruptive, they are absolutely essential as a cleansing period to reset and rejuvenate, recalibrate power and shift resources from the old to the young, from the few to the many, and set the foundation of the next social and economic ‘spring’ that will follow.

Howe summarizes the secular backdrop well in this 15-minute video from 2017–which anticipated some of the events that have materialized since.

The below update interview from November is longer but also worthwhile. Here is a direct video link.