Camille Van Vyve
25 Jul 2024
"You can neither beat the market nor extract yourself from it"
A key figure in French-speaking media on economic and monetary matters, former CEO of Degroof Bank, ex-partner at consulting firm Roland Berger, former president of the Brussels Stock Exchange, and author of dozens of books, Bruno Colmant gives Easyvest an unfiltered interview.
There was a time when you could find him in the plush corridors of Rue de l’Industrie, the headquarters of Degroof Bank. Majestic staircases, thick carpets, and attentive reception staff. On Boulevard du Souverain, the Brussels headquarters of Roland Berger, the decor was certainly more modern, but prestige and elegance remained the order of the day.
On this July morning, we meet Bruno Colmant at the Foundation against Cancer. He comes to open the door for us, as the building is quite deserted that day due to the summer season. In the office where we sit, two potted plants are the only visible decorations – matching the BBL (the former Banque Bruxelles Lambert) playing cards on the table, a nod to the former banker sitting across from us, also dressed in green.
The sobriety of the place is justified, as "every euro spent here was donated by someone," recalls Bruno Colmant, who took over as interim director of the foundation a few months ago. Second only to the King Baudouin Foundation, the Foundation against Cancer raises 40 million euros annually in donations. Direct donations, but also many deferred donations, as many donors do so through their wills, often executed only years later. Prevention, research, patient support, and project funding: the tasks are numerous, and Bruno Colmant tackles them with sincere commitment. In addition, he holds various board positions "to keep a foot in the business world."
Easyvest: "Bruno Colmant in a new environment or a new Bruno Colmant?"
Bruno Colmant:"I no longer live under the oppression of professional life, and I have intellectually deconstructed myself, in the sense that I view the market with a much colder eye. This brings me a lot of personal tranquility."
How do you see the market now?
All market finance theory is based on the Capital Asset Pricing Model (CAPM), imagined by Sharpe in the 1960s and based on Henri Markowitz’s work on modern portfolio theory. In this model, comfort is given by capital, but capital is at risk: it’s a fundamentally "unsettled" model. This comfort is obtained by valuing future financial flows in the present, meaning we are essentially sucking in a future that doesn’t have time to regenerate for present enjoyment. In summary, we destroy nature to enjoy the present.
But we are inevitably part of this market, right?
Yes. Sharpe’s model assumes that agents, investors, are perfectly informed, there is no friction, and agents are interchangeable. These agents are in the market – in reality, they are the market, cannot extract themselves from it, and can never beat it.
The market is considered imperfect, but overall sufficiently perfect to function more or less according to this theory. Do the United States play a leading role in this immense machine?
First, they are champions in avoiding friction between agents, as they reduce social security to the bare minimum. Everything is done to make humans vulnerable. Second, the United States represents 4% of the world’s population but 60% of the market. They have a colossal debt, a gigantic part of which is held outside their borders, further increasing their global domination.
Should we fear the return of Donald Trump to the White House?
He operates on a financial logic aimed at increasing American supremacy at all costs. He wants tax cuts, low-interest rates to further increase debt, tariff barriers to limit imports, and a weak dollar to boost exports. To achieve this, Trump would have to strip the FED (the US national bank) of its independence, but I have no doubt he could do unthinkable things. This cocktail would create inflation in the United States and a recession in Europe, especially because of the export barriers he wants to impose on us. And it’s also the kind of context where currencies lose their stability, which can become very dangerous. But nothing is certain since Kamala Harris’s candidacy*.
*Bruno Colmant's interview took place just before Joe Biden withdrew from the US presidential election.
How did the United States get to this point?
I believe the American system is out of breath. It’s the oldest democracy that hasn’t gone through a period of authoritarianism, and it seems that the new system emerging across the Atlantic, if Trump is elected, will be of that nature. In fact, the United States has always managed to expel its domestic violence through wars fought elsewhere. Now that they are energy self-sufficient and there are no more wars to fight, they are forced to internalize the violence. It’s a perfect breeding ground to establish "Trumpism."
But the United States is not the only one operating this identity retreat...
That’s true. It’s as if people want to find identities to counter globalization. Retreating into oneself has a reassuring aspect in a globalized world.
In Belgium too, the political shift to the right is marked. Did you see it coming?
Not at all. In recent years, I have moved closer to the political center while more clearly discerning the benefits of the welfare state. You know, I was a scholarship student; I owe everything to the state and am a fervent defender of the Belgian social model. I believe I owe the state more than I received. But with the current level of Belgian debt, needs for pensions, energy, and defense, and the liberal stance favoring tax cuts, some want to cut social spending, and that worries me. I fear we might privatize healthcare in Belgium.
Regarding debt, the one-year government bond issued by Belgium in 2023 is soon to mature. Was it a good operation in your opinion?
That the state reappropriates savings flows seems entirely legitimate to me. But in the end, the operation cost quite a lot, notably due to the reduced withholding tax of 15%. For the investor-saver, given the level of inflation, it wasn’t ideal either... but still better than a savings account. That said, if the Belgian state issues a new bond in September, it certainly won’t be under such favorable conditions, so alternatives will need to be found.
Personally, what type of investor are you?
I have a past as President of the Stock Exchange, which has obviously influenced me. I am invested in "full equity," with my home. And I prefer inflation-transitive stocks, meaning those positively correlated with inflation.
How do you see the future of wealth management?
Today, we no longer really need a private banker strictly to build a portfolio: artificial intelligence and ETFs allow it to be done easily, at least for the initiated. The value of a private banker is essential but is shifting towards higher value-added services. I believe wealth managers will retain at least two essential roles for investors: that of a psychologist to precisely understand a client’s orientations and risk aversions, and that of an estate planning advisor. This latter aspect is fundamental in an increasingly legally complex world and in the known context of an aging population.