Like watching a once dominant athlete that has lost his/her quickness and superior skill set, so has it been watching a number of famous investors either bow out or encounter troubling times. Few will feel sorry for these investment managers who have been humbled by Mr. Market, among them being John Paulson, Bruce Berkowitz, Ken Heebner, Bill Miller, and many others.
Other HF’s who reportedly lost interest and faded into the background by retiring have included Atticus Capital’s Tim Barrakett, Duquesne’s Stanley Druckenmiller, and Tontine’s Jeffrey Gendell. These were/are big fish in the hedge fund world.
So as we approach the end of another dizzying year in the markets one can ponder whether markets REALLY are different now. Is this the case? Have factors previously absent in relatively low volatility bull markets such as sovereign debt crises and housing declines permanently altered the investing landscape? Market analysts have rushed to explain these pressing questions by calling for a “New Normal” or “Sideways Markets”. The truth is that nobody knows. I would argue that although the present and future may not as closely resemble past years/decades, financial markets are as similar as ever. The markets don’t need you or I, or any of the investment titans I mentioned above. They will continue tomorrow.
If they really are different, do we have the psychological wherewithal to deal with this volatility? I watched my alma mater play a hard fought basketball game last night only to give up the lead in the final few moments and lose by over 10 points. The markets today are tiring and easy to be burned out by. If we are not careful, we can have a stage of “tiredness” where we are not paying attention and get smashed despite having paid such close attention for so long.
This begs another question as well. In a period of extreme volatility where sentiment goes from extreme bullishness to bearishness with one Eurozone rumor, are we way too focused on the short term. Like I asked on Twitter, “If you were told you couldn’t trade the positions you currently hold for a year, would you be comfortable holding what you do?” I don’t think there is a right or wrong answer. If you said yes, I believe you should take comfort in your apparent analysis and willingness to hold said positions through thick and thin. If not, is your analysis and thesis sufficient enough to handle the positions moving against you dramatically? The facts of the economy change all the time, and in many cases, our views should/will also change. These are tough investing times we live in. But wait, are they really? Or are they just the same? For your viewing entertainment, here are some of the responses:
“no way. i’m all about having an out and being able to jump out of mistakes”
“I would say YES, and your question helps to put the current environment into perspective. We are SO focused on the short term”
“I’d actually prefer it. I have more confidence in my picks than my ability to not overtrade them in this market!”
“I wouldn’t like it, but I wouldn’t panic. adjustments are pretty small, lately”
“nope, decaying options.”
“I honestly came to terms with 5 years…if the market closed for 5 yrs I’d be fine…or at least that’s what I tell myself :)”
“hey dave u know I think your great, but cmon bro, this mrkt is so f’d, a week is plenty…world default”
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