As both an advisor and an investor, I am sickened by the events of the last year and half. When I started in the brokerage industry, George Bush 41 was the President and I started at the training program at PaineWebber in NYC. Working in NYC, I learned about many things, quickly. I learned about goat cheese, sushi, triple tax frees, sector rotation, french cuffs, how to smile and dial and how to ask for the order. I fell in love with capitalism and the capital markets. I remember when one of my prospects, a self-made type, listened to my pitch and then asked me how much of my own money I had in that investment. I fumbled the answer and didn't get the account. That day, I vowed never to let that happen again, and I started to invest myself. The biggest fear brokers had was Schwab taking business away from full service brokers.
Having my own money on the line kept me on top of the game. I grew increasingly interested in the technicals of the market. I befriended the oldest dude in the office who kept his own point and figure charts by hand. I remember him telling me throughout 1999, that it looked like a major top was forming. I started placing trailing stop losses on all of my and my client's positions weekly. The market eventually topped on March 10th of 2000. By the 15th of March, my stops were getting hit and soon after I was out of the market completely. I survived the dotcom crash but I never thought the NASDAQ would still be at less than half the peak-eight years later. Then, the biggest fear brokers had was online brokers and decimalization.
Along the way, we encountered Enron, Worldcom, Tyco and Long Term Capital. I sold my UBS when I rolled over my 401k in 2004. As the yield curve flattened, I passed on investing in financials. I am sorry for those of you who still have shares and worthless options. Today, I'd say that our biggest fear is that investor confidence has been shattered. Will it return? How? Will boomers give up on the market after treading water for almost a decade? Will younger investors get interested? Personally, I've gone from being a Republican to feeling like a Democrat. My portfolio's value is down, my home's value is down and my income is down.
How could regulator after regulator have failed so miserably? How could rating agencies have issued AAA ratings on securities that they knew were time bombs? How could quants have developed valuation models where housing prices only went up? Is there an auditor in the Big 4 that can actually read a balance sheet? How could Citibank's board of directors have been so reckless with their shareholders? How can AIG take a bailout check and then throw a lavish corporate retreat? How can Madoff have duped regulators for so long? How can John Thain head a troubled company and then spend over a $1 million to decorate his office using a company check? Can we bring back the uptick rule? Can analysts start analyzing instead of being spoon fed guidance by companies? Is printing $1 trillion more dollars our best option? Will increased regulation from Washington result in bringing back confidence or will it bring more unintended consequences?