The Interloper blog commenced on October 18 primarily as a means to avoid atrophy of in my writing skills, such as they were. In terms of content and with the ongoing OWS outrage in the background, it seemed a safe place to anonymously flesh out general theories as to why things are as they are in finance, less the machinations of evil Bond villains in secret underground lairs than the logical outgrowth of daily-apparent, monetary incentives.
Judging by the comments and emails, the posts generating the biggest, most surprised reactions were those that described the daily activities of finance as the same as any other. After the first post that was linked to widely, Sell Side Optimism Explained, and to some extent “Protip: Find the Worst Public Speaker Possible”, readers seemed horrified that the members of Institutional Sales Desks and Portfolio Mangers are in many ways little different than door to door encyclopedia salesmen. The surprise, I think, finds its roots in the fact that people expect finance to be different than any other industry in some fundamental way, as though it shouldn’t attempt to maximize profits every day like PepsiCo or Pfizer or Wal-Mart. In this light, OWS and the general disgust towards finance includes a hint of betrayal – we don’t really care if salty snacks include small amounts of corn syrup because its makes them more addictive, that’s just business, but we thought you guys were different. We trusted you. We freely handed over our money and thought you would help us out.
Both within and outside of finance there is an aspirational sense among many that Wall Street is The Big Time, like the NFL, where only the prettiest, smartest, best-dressed and most dedicated can survive. Readers have reacted strongly where, when the veil is removed, this turns out not to be the case. When I wrote last week in Impenetrable Chinese Wall or Research, Not Both, about analysts often working for Investment Banking rather than trying to correctly predict future stock values, many of the reactions were similar to Bears’ fans disappointment at the seamier side of Walter Payton’s life as detailed in the recent autobiography.
Three other posts that got attention, “The Market is Not Rigged Against Your Success – Your Brain is”, “Investors as Consumers, Markets as Video Game” and “Zero Hedge, Steve Jobs and Who’s Really Responsible for the Despicable Cesspool of New Stock Issuance” can be summarized succinctly under the category “Its your own damned fault”, and I feel strongly about this. There are many things about finance that should be changed through intelligent regulation, but it is also true that investors have to take responsibility for their own shortcomings in participating in the investment world. I have used the analogy before, but ethical decline in finance is similar to the rapidly-declining quality of broadcast television, with the laziness and complacency of the audience as central causes. If investors demanded more of themselves, the development of enough background knowledge to ask better, more skeptical questions of their FAs and greensheets, the industry will be forced to respond. Again, in many cases they are giving you what you want, just like the drivel on CBS in primetime and if you keep responding, it will never change. The business media, too, has a role to play in this as I tried to explain in “Liesman vs Achuthan and Why Investors Should Be Terrified of certainty”. We all need to get better, and not just wait for someone to fix things for us.
The first month on Interloping has also included more direct investment advice, but this has been focused more on how to think about markets than what to do in the markets. I’m totally comfortable with this – there are far too many bloggers ChessNWine, TechnicalTake to name just two, whose trading skills are better than mine ever will be. In any event I am, as apparent in “Tebow Effect: Investing Lessons From NFL Gambling”, far more interested in thought process than purple crayons, with no disrespect to the diligence of chartists.
The past month has been a tremendous experience, and I do not exaggerate when I say that. It is intensely gratifying to detail theories that have been bouncing around in my head for a decade or more and have people read and respond to them. I have few regrets, although I do cringe when reading “Everything Good or Bad About Finance” which came off as far more bitter than I intended. I blame a chest cold and am leaving it up as a reminder. There are a few more ideas in the hopper but when I get to the point of re-hashing, or responding to daily news, I will stop. I have to find one of them job things soon, anyway. I want to thank everyone again for following along, and to again thank Josh Brown, The Reformed Broker, and Tadas at Abnormal Returns, without whom much of what I have written would be sitting gathering dust in this forlorn corner of the Interwebs.