In financial markets, it’s said over and over, that it’s not greed that drives the world, but envy. Everyone is always so interested in keeping up with the person next to them or the returns they have, that it pushes them into wanting to follow them, take risk like them, get “rich” like them. It pushes them to do things they would have never done before or act like people they are not.
Peer pressure may seem elementary, but it extends to many things beyond just human interactions. It is in abundance in financial markets. Hearing of godly sums of money and wanting to be near it has been in markets since the dawn of the Buttonwood tree. Visions of grandeur. Illusions of money raining from the heavens.
I write this post, because as I reflect on market dynamics of the last two weeks, I am now hearing stories that bother me. First off, if you can’t take a 30% drawdown in markets you should not be invested. People too often forget that a large portion of investing is making money off of other people’s money. That is not a noble pursuit no matter how you cut it. In the Financial Crisis, when I was just getting started, I learned that lesson in a very harsh way. Quite frankly, I wish I left this industry and got into something that actually changed and helped the world. Sadly, today, I am a trader through and through and it’s what I do. It’s what I am.
Sometimes, I take a crass approach to it all, but I believe people need to remove the image of riches they have in their minds that supposedly come from markets. There is no free money. You can’t put a price on peace and harmony. It may be ridiculous for me to write a message like this now about markets while they are down, but no one wants to listen in a bull market. Everyone only wants to cheer. I hope I have your attention because I think, going forward, as a society we can do so much better being less focused on financial markets, CEOs, magazine covers, and the modern hype machine. We can do so much better focusing on the sciences, something real, or any other pursuit beyond somehow, magically, turning one dollar into six.
For those who remember the Financial Crisis, this same message was echoed, yet we clearly learned nothing from it. I mean, I just can’t even begin to fathom that practically 10 years since the Financial Crisis, since the modern world almost ended, we are on the verge of bailing out companies again because of the debt they took out and the enormous sums of money they spent on buybacks or themselves. When I was 4 years old I had a piggy bank. I don’t understand why companies or corporate mangers can’t do this today.
One final note, while I am on this, is that I would like to see more young people get leadership positions. I am exhausted from the current generation of leaders. They were there in 2008 and here they are again, bloated on excess. Look at Boeing’s balance sheet. Look at Marriott’s balance sheet. Look at the airlines’ balance sheets. There is nothing there, but a failure of risk and a failure of understanding short-term excess jeopardizes long-term success. I’m not joking. There is nothing there besides this idea that they could leverage the future cash flows on their own riches now. Sure there’s some IP (intellectual property), but what the f*** is IP when you’ve been hacked 100+ times. They get no excuses.
That is all for now. See everyone next week.