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Defending Wall Street In All The Wrong Places

True story.  It was 2006, and I was taking the Q train from my job in Manhattan to my home in Brooklyn.  I was sitting, reading an investment book the title of which I can no longer recall. As the train pulled into a station and the doors opened, in walked a rather shabby looking gentleman.  His cloth, hair, and general appearance indicated that he had experienced financial and perhaps mental hardships and from first impression seemed like he wasn’t “all there.”  He smiled and then sat right next to me.

Over the next few minutes I noticed that this man was curiously studying my book, glancing at the cover, and trying to read the words printed on the pages.  At that point I knew that it was only a matter of time before he tried to strike up a conversation.  Sure enough a few moments later the man asked what it was that I was reading.  I answered politely that it was a book about the stock market and investments.  Since I don’t remember the exact words spoken between us, bellow is a paraphrased summary of our conversation:

MAN: Why are you reading that garbage?
ME:  I work at a fund where we trade a lot.
MAN:  Gee Wiz.  All that stock market stuff is @#&!  It’s all luck
ME:  My company seems to be doing okay, and has been for some time, I don’t think it’s luck.
MAN: So were all those mutual funds that went belly up after the 2000 market crash.  They were doing well also, you saw what happened.  
ME:  Well, I think some investors get lucky and some have special skills.
MAN/; No!  It’s all a huge scam.  They are just gambling.

At this point I launched into a hastily thoughup, metaphor-filled speech about consistently profitable poker players, Warren Buffet, and superior returns of high frequency trading.  But as hard as I tried to convey my point, the man stuck to his survivorship biased argument claiming that all these winners simply got lucky, and although I tried, I couldn’t come up with a convincing argument to prove him wrong.

Five years later, after yet another market crash that wiped out many of Wall Street’s top performers I remembered that conversation I had on the train.   I still believe in my metaphors, and Warren Buffet, and that stellar market returns are possibl, and with high frequency trading, even likely.  But if I were to run into this same shabby-looking gentleman once again it would be him and not me that had the new talking points.  Not that I don’t believe that I am right, but as someone once said about the stock market “it sure is hard to love someone when they keep breaking your heart.”

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.