Forget about socialism – shareholder capitalism is up to the task

Earlier this year, asset manager Standard Life Aberdeen rebranded itself as abrdn. It’s a very silly name for many reasons: not having vowels is silly; not having a capital letter is silly (especially at the beginning of sentences). But there’s the good news: The company isn’t as dumb as it looks (which is why I sit on the board of an investment firm it manages). He has a new ad campaign going on, and that’s pretty good.

Instead of the vague nonsense you get with most financial ads (which suggest it all has something to do with teeth whitening and vacations), the company has actually tried to explain what the investing – funding the companies that actually do the things that keep the economy going. “When you invest in that,” the TV commercial says, on video of a construction site, “you invest in there,” on video of happy people at a football game. The same trick is used for scientific research (you see the labs, then a child with a prosthetic limb) and hospital equipment. Radio advertising takes a similar approach. The idea, says abrdn, is to reframe investing as “a capacity – the power to change, not only your future, but many futures, for the better.”

Sounds good, doesn’t it? He is. Over the past decade, capitalism has taken a bit of trouble: over 60% of British Millennials think they would like to live in a socialist society; we think they probably wouldn’t. We also believe that if they understood that they have majority ownership of stocks (via self-enrollment in retirement) and their ownership gives them power, they might change their mind. After all, while socialism promises everyone property and power, it has never really kept its promises; shareholder capitalism is deliver. There is a hill to climb before this is fully understood in the UK – a recent survey found that only 35% of adults know their pension contributions are in shares – but campaigns like this are sure to be. useful.

Having said that, there is a problem with the campaign. This suggests that investing is a soft, mellow, and mostly green type of wellness (“… when your investments do good things, so do you”) that generally goes well. This is not necessarily the case. Investing can also mean capital losses, miserable retirement and failing technology. And in order to be properly diversified (and more secure in getting the returns you need), you may need to invest your money in things that are more morally complicated than prosthetics for children. Right now, many markets are expensive, and almost all of them are fragile – see page 6 for the various breakdowns and recoveries caused by the Omicron variant over the four days since its apparent discovery.

Recent history suggests that you should buy every dip. Long-term history indicates that with valuations and clearly non-transitory inflation, you should only buy very cautiously. What counts as safe? Take some oil. There is nothing in the abrdn ad that points out that when you invest in oil and gas, you are also investing, for example, in sulfur which is a large part of the fertilizer that helps maintain global food security. But you do. Lithium mines may not look soft either – but we need them and there is a mismatch between supply and demand that makes the industry attractive. You can also look at emerging markets: buying in Turkey, Russia, or South Africa may not feel comfortable right now, and it certainly doesn’t come with a soothing voiceover, but there is often good reasons to buy what others avoid.