In a previous role, I hosted a ‘Wrap’ session. These brief 15 minute roundtables allowed us to take a current event and discuss the implications across the entire investment industry. Sometimes they were esoteric or seemingly mundane, one discussion started around an impending snowstorm and the chances of working from home, yet we found market impact. Sometimes they were top of the news, such as when Brexit was supposed to immediately and dramatically influence our lives…not so much. No matter the initial topic, there always seemed to be a way to show impact across many, if not all parts of the securities industry. Much of this industry is treated as separate silos, yet it is important to understand what other people are thinking as they make their decisions about trading and investing.
Having spent almost 14 years in commodity futures trading pits, knowing when someone might be bluffing was a large part of the advantage of having a membership. Take poker for instance, where reading the face of your ‘opponent’ is more important than the cards you yourself hold, or so I’m told…Unfortunately, with trading all being conducted by electronic means these days, reading your opponent has become much more difficult. Additionally, the availability of information in milliseconds, though not always accurate, has also put a new spin on the game. It’s often tougher to figure out your own opinion much less trying to guess someone else’s.
It’s truly a reality show out there. Major and minor events often have equal immediate impact as well as being forgotten quickly, as we move on to the next ‘episode.’ The Kardashian society we live in today demands a short attention span. Dwell too long on one topic and you’ll miss something; everyone else has already moved on to the next shiny thing. The anticipation leading up to Scottish secession was palatable. Yet, within the blink of an eye, we were on to Brexit. As a bonus, the Democrats and Republicans provide non-stop soundbites to mull over, in something maybe more akin to a reality show than the campaigns of our next president and the runner up. Retirement fund meet pop culture.
Okay…So far, I’ve covered playing poker, pop culture, and a bit of world politics, but nothing about investing, or trading (Jesse Livermore pointed out the difference between the two) as we all seem to now do since it provides much more immediate gratification. But that’s what this blog is actually about. The 10% correction is no longer looked at as a healthy break, but rather a mini-series beginning as the end of the world and ending with a ‘whew’ moment, looking for someone else to blame of course; then we’ll vote them off the island.
The securities industry itself has often suffered from a habit of making silos. A fixed income manager was not much use to an equities guy. The commodity traders, well they were a small group, so what influence could they really have. The technical analysts, the guys with those weird charts, well that was all voodoo anyway. Now everyone wants to know what everyone else thinks; no, everyone needs to know what others think. No successful foreign exchange trader is ignorant of commodity prices. No fixed income trader is quietly plying his trade in a cozy office on another floor. They are all glued to CNBC, Fox Business or Bloomberg TV awaiting Janet Yellen’s next words. At times, it feels like they’ve all become my 14 year old daughter gathering with her friends for the season finale of Pretty Little Liars.
This, finally, brings me to the essence of creating this blog. How does it all tie together? Is the growth of the first flower in space as important as the Greece bailout (any of the bailouts…)? Well, not nearly as many people are talking about the Greek bailouts as earth shattering events at this point. Short term, intermediate or long term, I’m no longer constantly reading and hearing about the profound impact the bailouts will have on my life and portfolio. Of course, I’m not hearing much about that Zinnia in space either, but in the long term that probably has a larger impact on our society.
Think about it for a moment. Beyond giving your wife anniversary roses while colonizing Mars, this development has long range implications for the drug industry, the cosmetics industry, the food industry, etc. Is there one on that list that you did not make the connection to? While not an immediate life changing discovery, if I’m following one of those industries, young, patient, looking forward to finding an edge that will help me stand out, I’m looking for offbeat stories like this. Why? The number of pharma companies, cosmetic companies and food companies that utilize flowers is a large universe. Clothing companies? Sure, add them to the mix. All of these industries will be affected by flowers in space. This will then extend, of course, to commodities; cotton prices will be affected if clothing materials can be grown in space…
Admittedly, this will not happen tomorrow. And, sadly, most investors, save for the few Warren Buffett’s among us, will not see past today’s account balance, this month’s statement, or at most, the last quarter or two. So we miss the story. Or worse, ignore it completely as unimportant. Should it be ignored? Well ponder this: 2-3 years ago, few believed Elon Musk could change the auto industry, the battery industry, the entire power supply industry. From coal producers to those that maintain the grids, his influence is being analyzed and felt globally, and in a much shorter period than most would have predicted.
It’s this ‘big picture’ (macro I believe is the current vogue term) that most have lost sight of. Is the 10% a healthy correction? Certainly doesn’t feel that way at the moment it’s happening. Has my money manager kept up over the last 5 years? Doubtful; because if he hasn’t kept up with the last 3 months he may be looking for a new job and you a new advisor. Goes against all that is preached, yet this is our reality. Why? Because perception is reality; and perception rarely sees more than a week ahead these days.
All this, and I didn’t even touch on the election. I hope you’ll come back to read about my perspectives on that, as well as the hidden treasures in the news. It’s not about my opinion, it’s about how you arrive at yours. THAT’S A WRAP.