Fear and Loathing on Wall Street

A recent study has shown that the single biggest influence on the decision an individual makes investing his IRA money is the person who sits next to him at work. This may imply a weak-mindedness in us all but likely is more a function of our lack of knowledge of the investment world, perhaps our disrespect for it and that inherent whimsical, crowd-following optimism that all we carbon-based units have. Read a book like "A Random Walk Down Wall Street" and you can throw a little nihilism in as well.

Investing is not complicated, it is impossible. It is a dangerous adventure where people who know little more than you do pose as experts and lead people along paths as poorly understood as the Amazon. In some respect it is reminiscent of our self-appointed political visionaries.The history of investing is littered with overnight wonders, weekly monthly and yearly wonders. There are few decade wonders. The very fact that some are successful over a decade give the rest of us mortals unreasonable confidence.

A simple read of investment adviser sites will tell a lot. One day it will raise a cautionary note about a company or a country or a currency, the next day a rebuttal will appear raising positive points about the previously denigrated entity. So a paper trail is created for any possible eventuality. It is much like the sports betting advice phone numbers. They promise the "lock" game between Pittsburgh and St. Louis--for free! Half the callers are told to bet Pittsburgh, half St. Louis. Half the callers win and think the betting site is great and return to bet with them. The only objective is the fee.

The fee is the motive in almost all of finance.You need to look no further than "The Big Short." People did crazy things for a fee. And for a fee based system, there has got to be volume. And the people who knew the truth were like some Old Testament prophet, ignored, shunned--everything but fed to whales.

Everyone thinks they know something that someone else does not, everyone thinks their intelligence, their information, their experience, something gives them an edge. And the fee is the price of admission. But the best information, the best minds are wrong. Long Term Capital Management was run by Nobel Prize winners in economics and they were so wrong they almost took a bank with them. And they were filled with hubris; after their bankruptcy they came right back with the same philosophy in a new entity and went bankrupt again.

For every seller there's a buyer, for every buyer a seller. Fear and greed. The astonishing behavior of Wall Street the last decade. Fees and hubris. That is all anyone needs to know about markets. The guy beside you has no idea what he is getting into and should not be followed.

The real problem is the money has to go somewhere.