FOOL ON THE HILL
An Investment Opinion
Revolution number one is the current bull market. Even if it ends tomorrow -- or is already over, as some pundits suggest -- nothing can change the fact that, 10 years ago, most experts would have said that what came to pass in the '90s could never happen, primarily because it had never happened before. The decade's booming economy and unparalleled public interest (and confidence) in the stock market, fed one another to produce a sustained, broad-based (in terms of demographics), rise in equity values the likes of which this country had never seen.
Revolution number two is the emerging empowerment of the individual investor, fueled largely by the Internet. This new technology promises to change public markets forever by molding a new relationship between the "financial community" and the average citizen. Slowly, the longtime Wall Street stranglehold on investor confidence, information, trading privileges, and -- to some extent -- profits is crumbling.
I've tried to see these two revolutions in terms of fact, not opinion, but I know how hopeless we humans are when it comes to pure, unadulterated objectivity. So I expect I'll get some angry e-mail from folks who disagree with one or both of these characterizations. This doesn't scare me in the least. As Martha Stewart would say, "It's a good thing." Both important topics should be openly dissected and debated by all interested parties.
On the other hand, how many of you thought -- as you read the two revolution paragraphs -- that you were reading the same thing twice? Did both revolutions sound the same to you? If so, you're one of the folks who's got me running a little scared these days. Here's why....
I know that revolution number one will end. This doesn't scare me. In fact, it's as close as it gets to unassailable truth in these uncharted times. The timing will remain a hot topic for ongoing discussion and speculation, but only a fringe member of the eternal optimists club believes that we've seen our last Bear.
However, I don't see any reason why revolution number two ever has to die, and I dearly hope that it isn't swept away in the carnage that will follow the eventual death of the Bull. And this leads to my personal story behind this story.
The other night, I picked up a Newsweek off the rack at the grocery store, lured in, obediently, by the bold "Why Buy-and-Hold Doesn't Always Work" headline. As I read the Jane Bryant Quinn feature story, I was reminded of the first time I ever endured a prostate gland examination. My doctor prepped me for the experience by explaining that I would feel a variety of strongly conflicting bodily urges, simultaneously. This is exactly what happened as I read this article.
On the one hand, Ms. Quinn hammers home some key points that just can't be made often enough in these days of stock market hyper-mania -- save more money, borrow less, trade less, manage risk, and ignore hype. Of course, I applaud her use of this high-profile space to provide this timely reminder of basic financial truths.
On the other hand, these important points were nearly consumed by what struck me as a pervasive, mean-spirited disdain for the individual investor. Ms. Quinn spends about 90% of her piece building the condescending stereotype of what she must see as the typical ignorant investor. I didn't get to the useful part -- the advice -- until I had absorbed all of her scorn. I see this a lot these days, and it's getting old.
To some observers, anyone who uses the Internet to invest (Ms. Quinn calls them "mouse-clickers" or "the point-and-click crowd") is young, blindly enamored of tech stocks, neck deep in online margin loans, unaware of bear markets, imbued with an entitlement mentality, a pure momentum player, day trader or over-the-top Cisco zealot ("Oh my gawd, John Chambers is such a hunk! Go CSCO!!!"), naively optimistic, AND� superficial in their understanding of investing strategies. Given the superior wisdom possessed by these commentators, they have undoubtedly avoided recent Nasdaq losses themselves. So what is it, I ask myself a lot lately, that causes them to show their concern for others in such a venomous manner?
I certainly understand the source of this attitude. I'm not blind to the excesses. All the attributes I ticked off above are evidenced by a huge number of investors these days and sometimes to an extent that's more than a little frightening (Except the "young" part. This doesn't scare me; it just fills me with jealous rage). But, honestly, while I appreciate the relevant advice shared by these commentators, I have a hard time understanding why the attitude so often dominates.
I fear that this is becoming an all-consuming crusade for some. They just won't -- no can't -- rest until all investors are old, broadly diversified, possessed of margin loans only from "respectable brokers" (not one of those dot-com guys), humbled into submission by a bear market, portfolio allocation zealots ("was that 30% in long-term bonds or 35%, I can never remember"), pessimistic, timid AND� smart enough to know that they'll never get anywhere without an expert's guidance.
In other words, the day we all break down and admit that we need a full-service broker is the day St. Peter opens up the pearly gates. And on that glorious, triumphant day, well -- lesson taught, greed humbled, order restored, game over.
It appears that in a great, arcing circle of hypocrisy, I have just worked my way into taking pot shots at people for taking pot shots. Time to cool off and finish up.
Maybe now, having drawn the absurd caricatures on either side of the spectrum, we can call it even and get down to tackling the issues for the overwhelming majority -- those in the middle. As the very first step, let's separate the two revolutions and treat each independently. If empowerment of these "middle" investors turns out to be a bad thing on its own merit, I'll have to let it go. But, please, let's not sacrifice it on the altar of the next bear market.