There was a time in the late 1990s, early 00s when I was quoted in the print media a lot. In the early stages, diligent bureaucrats that they were, the company demanded I take a full day of media training and a more pointless exercise I have rarely undertaken, The emphasis on obfuscation and ending each comment with a restatement of corporate initiatives was by and large an exercise in “How to ensure a Reporter Never Calls You Again Under Any Circumstances”. There is, in the end, only one real rule about dealing with media, as immutable as death and taxes : never say anything negative about any specific person or entity. I was about to have this demonstrated in no uncertain terms.
At some point in 1998 I got a typical call from the media asking for comments on the relative performance of different investment styles. My comment at the time was, I thought, pretty innocuous. I indicated that sector rotator managers (in the parlance of the time), having positioned for a conventional late cycle rally in commodities, were blindsided by the Asian/LTCM crises. I actually said “sector rotators like Mr. X”, carefully choosing a no-load fund manager. I worked for a full service brokerage and our brokers would not sell a no-load fund at knifepoint, so I thought I was good. I hung up the phone and went about my business for the rest of the day.
The next morning, the story is printed and for reasons I still don’t fully understand, the reporter had added “Mr. Y and Mrs. Z” to my comments when I had never mentioned them. And here’s the important part – combined, Mr. X, Mr. Y and Mrs. Z composed three of the top five institutional commission generators and Mr. X in particular had called early in the morning and demanded my head on a plate. Upper management, peon that i was at the time, was only happy to oblige.
Thankfully, this was a rare period where I did not physically sit on the trading floor (they would have walked over and fired me immediately) and got enough warning to escape the building before they could find me. Things resumed as normal, except for the anxiety, the next day when everyone calmed down.
This, I realized, was real media training. Like a complete moron, I assumed that the media was merely an unwitting pawn, the free marketing wing of my plan to take over the world. After the incident, I realized I was never in control of anything at all and that my position in the whole process was much more akin to a professional bull rider, with the media as bull. Sure, I could benefit from the media, but could also get tossed on my head and stomped through little fault of my own.
The bull rider metaphor has interesting applications to investors’ current experience with the market. Up until the GFC, the general feeling was that the market was a benign, even helpful force, automatically creating future wealth. Post-GFC, the average investor views the market like a pet lion owner in a small condo, or like a penitent to a bi-polar god from Greek mythology.
Longer term, there are benefits to this newfound respect for risk, and recent volatility can be seen as instructive and not just penance for the Great Moderation illusion. The market, like the media in my example, has its own agenda and was never our friend. Thoughtlessly tossing money at it with the expectation of future wealth was, in hindsight, merely another sign of overall cultural complacency. The punishment may not be commensurate with the crime, but if the gut-wrenching volatility of the past three years results in more financial diligence, then that at least something positive has occurred.
Investors would, I think, benefit from thinking more like a bull rider in the current environment. Recognizing that, while opportunities are available, the bull/market has the upper hand and that the possibility of being blindsided at any time forms a helpful reminder regarding portfolio risk.