We used to call them “hot rodders.” You know the guys. Packed four or five to a car, they’d tool
around in their souped-up automobiles, hooting, hollering, cavorting, just
having a wild time. Older folks would
call them “menacing.” Others would just
scoff and try to avoid their ribaldry.
In general, they weren’t bad people,
just a little more reckless than most.
They acted as if the consequences of their actions were of little
concern, or nobody’s business altogether.
Sound familiar?
Do these “hot rodders” remind you of today’s “Wall Streeters?”
In my mind, I draw comparisons
between those yahoos of yesteryear and today’s gunslingers who populate the
financial community. To be sure, it is
both inaccurate and unfair to categorize everyone on the Street as being either
one or the other. But the menace seems
analogous. I no more want someone speeding past my front bumper on the highway as
I do in the boardroom. And I have no
patience for the “hilarity of irresponsibility” depicted by both.
It seems, sometimes, that the
juvenile delinquents of the 1950’s have grown up to become the miscreants of
the financial markets. Yes, I know,
that’s hyperbole and exaggeration, but you get my point. Synthesized
mortgage products, leveraged hedge funds, 24 hours online day trading are the
hot-rods of today’s financial highway.
And as with the observers of
old times, one can only look in hapless frustration over the recklessness of
those who whiz past our bumpers.
Time for
civility.
It’s more than past time to sound the alarm on
financial irresponsibility.
The markets are currently unwinding the greed of the
past few years but not without difficulty.
We seem to have lost the
confidence of the average investor. They
are wary of trying to “time the bottom.”
Rather, it’s in their best self-interest not to play the game at all.
Further, the erosion of corporate profit acceleration
has laid bare the dearth of new ideas and a shallow asset allocation
probability.
Recently, my work indicated
that a plurality of market sectors I follow have turned negative for the
duration. This raises concerns that
fundamentals, alone, cannot rescue the direction of these trends. Obviously, in that climate, the delineation
between winners and losers becomes more obfuscated.
Economic fundamentals,
similarly, have been of little help in changing these cyclic phenomena. Savings rates are quite poor, debt is high,
portfolio valuations are stagnant, inflation (and higher interest rates) are
likely, and peripheral exogenous news is dramatically cataclysmic.
“Steady as
she goes.”
If it seems as if I’m rife
with negative expectations you’re half-right.
My job as ship’s navigator is to plot for a successful result. That involves knowing the hazards and making
the prudent call. My aim always is to
generate positive “alpha” with minimal drawdown.
My track record indicates that
I have achieved that mission. Now I need
a little help from the external factors over which I have little control…
…and for the “hooligans” to lay low for awhile.
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