Monkey Business

I can be a bit abrasive at times. Longtime readers will attest to that.

Usually, that abrasiveness manifests in arrogance, mostly of the intellectual sort. I’m the last person to claim I know everything, but the first to claim I probably know more than you. Those two things go hand in hand, by the way. I’m steadfast in the contention that almost everyone is ignorant about most things, including myself, which is why I spend every day trying to remedy that situation as it relates to my own understanding of the world. That daily quest makes me confident that, generally speaking, I know a little more than most people about most things. Hardly a grandiose claim, but one that (too) often comes across as unduly aloof.

I’ve tried (assiduously) to direct my arrogance towards people who are themselves arrogant (e.g., “professional” traders, hedge fund managers and the like) but invariably, it finds its way into my sarcastic musings on the market adventures of retail investors.

Importantly, we’re all retail investors in most respects. Folks have a tendency to cite this or that (experience, account size, etc.) in calling themselves something other than “retail,” but at the end of the day, almost all market participants are retail investors. Just because you’re trading with $5 million doesn’t really make you any less “retail” than somebody trading with $50,000. Even if you’re managing $250 million, chances are you’re still pretty much a nobody.

But over the past year, retail in the “truest” sense of the word has come to dominate the headlines, whether it’s call-buying in an effort to weaponize gamma (an impressive testament to what can happen when people suddenly become aware of their capacity to shape their own reality), coordinated attempts to engineer short squeezes or just plain old trading in droves on Robinhood. The idea of a “retail mania” is now a mainstay in the financial press and there’s plenty of data and evidence to support that characterization of increased retail involvement across markets.

Read more: Candy Crush

I’ve tended to adopt a derisive tone towards most of that activity for a very simple reason: You don’t need to trade crypto or chase GameStop or set pennies on fire buying calls to make money. All you need is a reasonably steady stream of investable (i.e., disposable) income, discipline and patience. If you’ve got those three things and you remember to always keep the “reinvest dividends” box checked, you’ll likely be well on the way to becoming a millionaire if you start early enough. Anything else is just gambling.

Simply stating that reality is enough to infuriate some readers. The twentysomethings don’t want to be told they’re wasting their money and the forty- and fifty-somethings trading a few million won’t ever come around to the notion that, much like Donald Trump, they’d have more money today had they simply put what they earned into an index fund and gone about their lives. The twentysomethings point to triple- and quadruple-digit gains as “proof” they’ll be rich in no time, and the forty- and fifty-somethings in many cases fabricate stories to tell themselves in an ultimately fruitless effort to explain away their ongoing, annual shortfall versus SPY (and don’t even mention QQQ).

That said, it makes little difference to me what folks choose to do with their money. Another thing about me that longtime readers can confirm is that I care just about as much about your last trade as I do about what you ate for lunch. I’m pathologically selfish, and one happy side effect of that is an almost complete inability to feel envy. Someone’s 20,000% gain on Dogecoin is just as irrelevant to my life as the tuna melt you ate while cashing in. As such, it doesn’t register with me in any meaningful way.

But it registers for folks like Stan Druckenmiller, who, despite their best efforts to feign the kind of indifference I enjoy, are so perturbed at the idea of regular people scoring Tulip Mania-type gains, that they’re willing to go on business television and call retail investors “monkeys.”

During a Tuesday interview with CNBC, Druckenmiller said a lot of things that deserve to be scrutinized and lampooned, but his spiteful remarks about everyday investors were easily the most unfortunate.

Last week, Neel Kashkari alluded to consternation on Wall Street, where some fret the Fed’s willingness to embrace moral hazard has killed price discovery. Specifically, Kashkari said,

For my friends on Wall Street, and I have a lot of them, I hear from them all the time complaining about the Fed’s policies that are mucking up their trading strategies. I have zero sympathy — because there are still 8 to 10 million Americans who want to work, who ought to be working.

He didn’t specify who those “friends” were, but you don’t have to look very hard to find soundbites from brand names and legends who implicitly or explicitly lamented the extent to which the Fed’s quick response in March and April of 2020 robbed them (the big-name investors) of opportunities to capitalize on the crisis. Howard Marks and Warren Buffett come to mind.

Asked about Kashkari’s remarks, Druckenmiller adopted what almost came across as a sneer. “Well, I don’t know who Neel Kashkari’s talking about,” he began. Then, he reassured Americans that despite claiming, a year ago tomorrow, that the “risk-reward for equity” was the worst he’d ever seen, he was “up 42% last year” and is up 17% so far this year.

What a relief. For a minute, America was worried Stan might go broke and have to… I don’t know, take a job at Starbucks or something.

Also, just in case it wasn’t clear what he was trying to convey (namely, that he’s still making money hand over fist and so is everyone he knows) Druckenmiller made sure to tell the audience that his friends are up even more than he is.

“I have six outside money managers who are up a lot more than me,” Stan added, before noting that, due in part to the Fed, “a monkey could make money in this market.”

The unmistakable “The lady doth protest too much, methinks” character of his comments seemed completely lost on Druckenmiller.

There’s no doubt (none) that he’s telling the truth about his returns. But castigating everyone else who’s making money as a bunch of “monkeys” whose success is attributable solely to the Fed is just spite. It’s what sour grapes sounds (and looks) like.

The sheer, blatant absurdity of the narrative never ceases to amaze me.

Folks like Druckenmiller would have you believe their sole concern in the world is the integrity of America’s capital markets and the preservation of your purchasing power.

That their criticism of the Fed is just an earnest attempt to raise awareness around the perils inherent in destroying price discovery and the dangers of fiscal and monetary largesse.

All Druckenmiller (and his ilk) are trying to do is make sure you “monkeys” can still afford a banana.