Wednesday, November 6, 2013

Wall Street and the Unasked Question

There once was a racehorse that won great fame. What do you think was the horse’s name. – Children’s riddle

As a child, I loved to stump adults with this riddle since it is a statement and not a question - the horse’s name is actually “What Do You Think”.

However, sometimes there are interesting statements being made by individuals via their actions that begs a question that few ask.

In a meeting with some colleagues yesterday, we were discussing yet another colleague who was cashing out his holdings (a little under $400 million), converting it into things like bullion and building the house of his dreams.

But unlike what we believe to be the typical Wall St’er house of one’s dreams, filled with opulent or decadent baubles, his house will be several hundred miles away from civilization and will be completely self-sustaining in the areas of food, water, security, energy and medical needs.

We put together a list of colleagues we have worked with over the years who have done similar things and we discovered that approximately 40% of our network (at least to our knowledge) were in various stages of starting, finishing or had already finished such a project.

There was a common reason why they were building such “havens from society”.

It’s a reason that is not a secret but is not openly discussed either unless one simply asks them the question “Why are you doing this?”.  Most are happy to answer the question … honestly …. brutally.

I’ve never been one to conjecture or spread rumors so I invite you to find a couple of Wall St. folks and ask them yourself (off the record, of course).

Ask them about things such as:

- the impact of ongoing quantitative easing and the difficulties associated with weaning the market off the Fed teat (especially after QE has been going on for so long) versus the impossibility of leaving the market on the teat forever. Have you ever watched a person be broken of their heroin habit – it’s not pretty and yet it must be done before the person self destructs.

- how the annual S&P 500 consensus earnings-per-share are trending and what this means.

- the impact of stocks being priced more than 50% higher than their 10-year average.

- the unusually high ratio of bulls to bears and what happened the last time the ratio was this high.

- the fact that the volatility index (VIX) is very low (despite some recent bounces), indicating that investors have squeezed much of the risk out of the market and are feeling very complacent (you know what happens when people get complacent about anything).

- historical impacts of previous meteorical rises in the stock market and how corrections are inevitable.

- how market trends and other associated economic indicators that are usually in congruence are not in the last couple of years, confounding many economics “experts”, forcing them to rationalize such anomalies with new, unproven, convenient theories.

- how markets go up or down at will despite the predictions of the experts (indicating that the masters of the domain are not necessarily masters of anything but are merely educated guessers – like the weatherman).

- how individuals and organizations create their greatest profits out of the ashes of collapse, making collapse critically important to their success.  This collapses comes at the expense of the misinformed, the uninformed and the complacent.

And then think of what happens when you take a racehorse that prefers to be held back until the last furlong but instead, you decide to whip its hindquarters from pole to pole in the longest, highest-stakes race of its Life.

Would you put your money on such a horse race after race?

They’re not either.

Although somehow it wouldn’t feel as bad if it was someone else’s money …… or would it?

I guess that depends on the nature of your values, doesn’t it?

In service and servanthood,

Harry

PS As a long-time Wall St. strategy person, I am not licenced to provide investment advice nor do I give any, therefore please don’t ask for any. :-)

2 comments:

  1. While I haven't been around Wall St., I have been around regular people and I can tell you that I see this echoing with them as well. There is a deficit of hope. Most people probably can't articulate why. They just feel it. And, it concerns me. I think, when a society goes for long enough being spoon fed their ideas and emotional responses from someone else (i.e. the media, politicians, etc...) they don't remember how to do things like ask questions. However, there is still something inside them that knows something's amiss.

    ReplyDelete
  2. Thanks for your kind comments, Nathan.

    Three things are important here:

    1. People who don't pay attention to warnings eventually get run over by something.

    2. There is always room for hope - hope for something better is essential to hold onto.

    3. A better future doesn't happen by accident - it only happens when the will, the effort and the courage exist to create it.

    Create a great day!

    Harry

    ReplyDelete