When the public feels outrage at the market manipulations, excessive greed, and unethical-bordering-on-dishonest, and in some cases just stupid, actions that resulted in the economic misery that is raining down on us all, it points the finger at “Wall Street” as the culprit. But “who” is Wall Street?
If you ask most people whom they mean when they talk about Wall Street, they have no concrete idea. Instead, they see a vague collection of powerful men (rarely women) sitting atop their brokerage firms and funds, trading securities, managing portfolios and living in modern-day palaces in the Hamptons, Greenwich, and the Watchung Hills without the slightest awareness of the impact of their actions on their fellow man.
Sadly, all traders seem to get lumped into that distorted picture of the Wall Street Uglies.
Then, there is a second class of individuals who are also seen as Wall Street: they are not the people at the top, but they are the thousands of young men (and some women) who are players in the big investment houses with other people’s money, as though they are in a toy store and it is all free. If you read Michael Lewis’ brilliant and horrifying recent article
chronicling the end of Wall Street, you will soon see why many people also associate these young Turks with the unconscionable money manipulators of Wall Street. Lewis, whose 1989 best seller, Liar’s Poker, was made into the Michael Douglas movie, “Wall Street,” begins his tale this way:
“To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital–decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue…. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.”
So, we can also add to the “Wall Street profile,” the young studs who were not necessarily at the top of the pile, but who were given the goose and all her golden eggs to play with. These two groups represent the “power players” on Wall Street in the eyes of most people, even those who work there. They are right in one sense, but dead wrong in anther.
The real Wall Street
Unlike the “power players” on Wall Street, most traders are not playing with other people’s money. They are trading with their own money, money that most of them earned the hard way and saved for years in order to trade with. For that reason, they are completely responsible for the decisions that they make and their fortunes rise and fall based on those decisions. They have spent years learning their trade, they have read copiously, and have invested a considerable amount of their own money in their training and preparation.
Our average traders, the ones I have worked with for many years, form the backbone of Wall Street. They provide the liquidity and stability with their own capital for the trades that everyone else makes, including the power players who amuse themselves with other people’s money (often in the service of their own enrichment only), and make it possible for the system to keep going even when the power players have manipulated the markets into a near-freefall.
The fallout
Here is the interesting thing about all of this for traders. Analysts are predicting that more than 200,000 people will be laid off on Wall Street, but that number does not include all of the independent traders. They work for themselves. They ask no one to take care of them. They did not essentially steel billions of dollars from the man on the street’s retirement funds and from investors through incompetence, greed, and through artfully constructed sleight-of-hand leveraging that defied all the laws of gravity and fiduciary responsibility. They are not working for the large investment banks that bundled subprime BBB mortgages into bonds and they are not working for the rating companies who gave these same bonds AAA ratings and allowed them to be foisted on the public by fund managers who did not care.
Traders will probably share in the blame for what the power players have done to our economy but they will not share in the credit for being “Wall Street.” But, never mind. Traders will survive this mess because they are entrepreneurs. They truly understand what it means to accept risk, to work for themselves, to manage their money, to work each day to adapt and grow, and most importantly, to handle loss and rebound to try another day.
When the fallout from this economic catastrophe is complete, among the only people left to rebuild the markets and get them back up and running will be the traders.
So, when you are asked who you are, you can proudly reply, “I am a trader. I am Wall Street.” Copyright 2009
From “A Lesson A Day For Traders” – E-Book #2
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