We’ve Gone Too Far

As I sit here on a Tuesday night looking out across markets I am increasingly convinced that we’ve spent the past nine years setting ourselves up for a veritable cataclysm.

I’ve heard just about all I will ever care to hear about the democratization of markets.

Creating vehicles that allow everyday investors to participate in large, liquid markets at a fraction of the fees charged by active managers is certainly a positive development. And to be sure, if more investors followed a simple, buy-and-hold strategy, the financial world would probably be a safer place.

Similarly, it’s refreshing to see “rockstar” managers who charge exorbitant (almost criminal) fees for their “services” squeezed. Just like it’s refreshing to see the market rethink the extent to which a 30-minute phone call with a top analyst is worth $10,000.

And yes, it’s nice that the world finally woke up to just how corrupt a culture “Street” life (so to speak) truly is.

Finally, it was nice of central banks to decide in 2008 that maybe we’ve simply come too far from a societal perspective for “creative destruction” to be a viable/realistic option when it comes to fixing the system. (Put differently, letting it all crash and burn in order to purge misallocated capital once and for all simply wasn’t feasible without triggering social unrest on a massive scale).

But at this point, we’ve gone too far. Now we’re in a place where…

  • investing is like apps – no matter how esoteric the asset, “there’s an ETF for that”
  • retail thinks asset prices only move one way (“up”) and central banks are happy to perpetuate that myth
  • the healthy Wall Street purge turned into a never ending witch hunt. Now there’s almost no one who’s carbon-based home. Which means when the shit finally does hit the fan, “phone a friend” ain’t gonna work – unless you want to talk to an algo (the market equivalent of “this is a recording”)

This is a recipe for disaster.

Simply put: when central banks pull the punchbowl, it’s going to be left to retail investors, their portfolio of ETFs, and an army of hair-trigger, headline-chasing robots to negotiate an environment where suddenly, for the first time in nearly a decade, markets are allowed to trade in a twoway manner.

Remember, we were stress tested on the morning of August 24, 2015. And we failed. Miserably.

What happens when that lasts longer than one trading day and all the people who — albeit crooked, hopelessly conflicted, and grossly overpaid — “had their fingers on the scales” are nowhere to be found?…

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5 thoughts on “We’ve Gone Too Far

  1. It’s drip, drip, drip…Chinese water torture a guy told me in the late 90’s. He had lived thru the 70’s bear market as a VC guy. It prepared me for the early 2000’s

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  2. Wrapped up as neatly and to the point as it needs to be for retail digesting. When the perma-bull networks are needing answers this would serve well as bullet points

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  3. In 2008 I said ok this economy will spend a few years shaking its self out and we can all just get back to work, I obviously did not have a clue ha ha
    The manipulation greed and corruption has had absolutely no bounds, this to shall pass one way or another guaranteed!

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  4. The Fed wanted to pull out in 2011, but at the same time our “representatives” decided they were going to pursue a policy of austerity. What was the Fed going to do, sentence a generation to joblessness? They complained every time they went to the hill that relying on monetary policy was a bad idea. Funny now that fiscal stimulus will probably just lead to inflation the congress is ready to do it. Idiots.

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