In 1994, Malcolm W. Browne of the New York Times wrote a lead sentence that was so breathlessly alarming it's still being talked about two decades later, at least among a particularly sardonic group of friends of mine. (You know who you are.) Under the headline "New Look at Apocalypse: Dying Sun Will Boil Seas and Leave Orbiting Cinder," Browne informed us:
Even supposing that mankind one day stems the population explosion and finds ways to prevent famines, wars, epidemics, the impacts of asteroids and other global catastrophes, Earth will still confront its ultimate doom: a bloated, searing Sun is destined to scorch and melt the planet, wiping it clean of life.
Hate to say it, but the weather report for Wall Street employment is sounding eerily similar for both the buy and sell sides, at least according to the financial meteorologists who appeared before open microphones this week. Of course, predictions like these are nothing new, but they seemed to reach a climax this week amid a busy conference schedule and more casualty reports from the wicked game of dodgeball being played on the hedge-fund killing fields.
Here's maybe how Malcolm W. Browne would tell this tale:
Even supposing that Wall Street stems the CFA charterholder population explosion and finds ways to prevent the Volcker Rule, the fiduciary rule, the Neel Kashkari symposiums, Elizabeth Warren press releases and other global catastrophes, the financial Earth will still confront its ultimate doom: bloated, searing data centers full of computers are destined to scorch and melt Wall Street's corner offices, cubicles and trading desks, wiping them clean of life.
The problem is that the bloated-sun apocalypse is more than a billion years away, while the Wall Street apocalypse is now, or coming soon to a theater near you. At least that's the takeaway as we look back on the week's big events: The robots will strike asset-management firms first, but few spreadsheet jockeys are safe. Hedge-fund managers are losing their swagger. The new "bond king" is some no-name guy at Vanguard where the management fees are microscopic. Even Goldman Sachs is laying off more Masters of the Universe.
For enthusiasts of the financial arts, the best to hope for is that all this pessimistic thinking is just another crowded trade the doomsayers will regret as much as the lemmings regret following Bill Ackman over the Valeant cliff. Yet it's hard not to be troubled by this loss of swagger, since swagger has always been one of this nation's most valuable natural resources.
There were some theories floated to explain why alpha is going extinct. “Frankly, I’m blown away by the lack of talent,” Steve Cohen told the Milken Institute Global Conference. Hmm, fair enough Steve, but forgive us for suspecting this might be an issue that's unique to you, given how things worked out for some of your talent in the past. Frankly, we could imagine the same complaint being made by what's left of the 2Fly YGz and Big Money Bosses in the Bronx, or a certain law firm in Panama.
Maybe the problem is there's too much talent, all chasing the same ideas. That sounds like what's up with Tiger Global Management, which lost 22 percent in the first quarter holding big stakes in Amazon.com and Netflix. They sort of threw their arms up, acknowledged being stuck in crowded trades and admitted they need new ideas.
New ideas are why people pay big bucks for a seat at the Sohn Investment Conference. (Oh yes, also to support the cancer research, sure, sure.) But the ideas were a bit underwhelming this year, to be honest. Ooh, Chamath Palihapitiya, tell us more about this obscure company you've discovered. What's it called again, Amazon.com? How exotic! And let me get this straight, Stan Druckenmiller, what you're saying is to sell all my stocks and buy gold? Thanks for confirming the thesis of every drunk uncle at every Thanksgiving since the Pilgrims landed! At least Carson Block found a bank few people had ever heard of before.
Alas, we thought we found some sign of life in Wall Street's mojo when we saw a headline about a "$100 Million Stud" from New York. But then we clicked the link only to see David Papadopoulos's byline and realize it was about a horse, not a financier.
Still, this tale about Uncle Mo may be the best inspiration Wall Streeters can find to avoid crying in their mint juleps this weekend. That's because many pundits have compared the technological disruption sweeping finance to the disruption caused in the horse-and-buggy industry when automobiles were invented. Uncle Mo in particular, and the Kentucky Derby in general, show us how our crazy economy has a knack for finding new opportunities for displaced and disrupted workers, be they horse or human.
So long as you're a stud.
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