Denizens of the financial district should just call it Easy Street
• What would life be like if doctors behaved like traders and surgeons like stockbrokers?
As reported by RIABiz, there was a telling exchange during the last Charles Schwab earnings call. An analyst grilled [the CEO] about whether Schwab was damaging shareholder interests in an overzealous regard for the welfare of investors. – Tom Brakke
Ben Carlson at A Wealth of Common Sense says he often finds himself saying “Only on Wall Street”, which got him thinking about what it would be like if other areas of life operated like Wall Street. Below is an adaptation of the piece that followed, together with a few of our own “what ifs”.
What if doctors settled for the same success rate as traders?
“If you’re terrific in this business, you’re right six times out of 10,” said Peter Lynch. “What if I told you that some of the best equities traders I know have a win rate of only 50%, and some very successful swing and position traders even have a batting average as low as 40%? You may find this hard to believe, but I assure you it’s reality.” — Morpheus Trading Group.
What if sports people acted like hedge fund managers when they under-perform?
“Faf, can you tell us why you lost the game?”
“Well, first of all, there’s no way we could have predicted the other team would make more runs than us. The umpires are partly to blame. Plus, on a risk-adjusted basis, we actually made more runs than they did. We also ran faster between wickets. So in many ways we outperformed even if the scoreboard doesn’t show it.”
What if surgeons behaved like stockbrokers?
Surgeon: “Hi, nice to meet you. I am going to recommend an appendectomy.”
Patient: “Actually, it’s my ankle that hurts.”
Surgeon: “Trust me, I know best. I’ve been in the game a long time. You need to adopt a holistic approach; in time your whole body will do much better if we get that appendix out. It’s a popular, low-risk procedure that will take care of almost every other ailment you’re at risk of contracting. Still, I’ll just take my fees on this upfront …”
What if your gardener got paid on a“2 + 20” basis?
“The standard fee arrangement in the industry is to charge 2% of the value of your garden (assets under management) and 20% of value of the things I grow (profit). So, let’s say your garden’s worth three-quarters of a million and a rose bush …”
What if commercial airline pilots could “go short”. Really? Need we say more? What if musicians operated like market forecasters who were right once and lived off that single call for the rest of their careers?
“Hi, we’re Chumbawamba. Remember us? We had that one song — Tubthumping — that was a huge hit in the late 1990s. We’ve been releasing a new song every year since then and even though they’ve all been terrible we’re still doing concerts and they’re still playing Tubthumping on the radio, which means you have to continue listening to us.”
What if your boss measured your work performance the way investors scrutinise Apple?
Boss: “Tina, you’re slacking. What seems to be the problem? You’ve lost your touch.”
Tina: “Gee boss, have you forgotten that I invented one of the most innovative widgets in the history of our firm just a few years ago, which completely changed the way our industry and our competitors operate? And that still generates more cash than the company knows what to do with.”
Boss: “That’s true Tina, but you still need to come up with something bigger and better or we’re giving your office to Sam.”
What if you treated your household budget like a company’s financial statement?
“How are we doing, sweetheart?” “Well, we’ve had to repair the roof, fix the pool, get our daughter braces and put down a deposit on a new car, but, luckily, they’re all one-off, nonrecurring expenses that won’t impact earnings on a pro forma basis. We have no cash, of course, and we’ll need to borrow more money from the bank, but our GAAP earnings still look amazing.”
What if the waiters at restaurants gave out menu advice like pundits on financial television?
“The best thing on the menu is the filet mignon. I can assure you that the chef will cook tonight’s filet to perfection.” [After it arrives burnt to a frazzle:] “Did I say steak? Scratch that. I obviously meant the periperi chicken. Why would anyone recommend the steak? The reason you should be asking for chicken …”
What if school grades worked like analysts’ estimates of company performance?
“Yes mom, I know I got a D+ in English but I did warn you that I might only get a D. So, in fact, I’ve outperformed expectations, which means I really should be congratulated and rewarded.”
What if online dating sites evaluated potential partners the way talking heads analyse markets?
“For the next three months, we’re urging caution on Samantha because she just got out of a bad relationship but we still rate her for the long term. There is a downside to James in that he’s a bit dull but we think he’s good for a quick dinner and a movie. We’re lowering our expectations on Tom remaining a “fun guy” as he’s a big Mercedes fan and Ferrari are looking so much better this year. Dexter is a second-half story so avoid him at the bar until he gets a few drinks in him. And we’re advising clients to stay the course with Janie as she has rich parents.”
What if your tailor talked like a Wall Street trader?
“You should go long waistcoats, short flannels. Hipsters are a fad. You want to add a bow tie? Let’s watch Love Actually.”
What if Santa Claus and the Easter Bunny could do what active managers do?
“All three are trying to pull off elaborate hoaxes. But while Santa and the bunny suffer the derision of eight-year-olds everywhere, actively managed stock funds still have an ardent following among otherwise clear-thinking adults.” — Jonathan Clements
What if we could treat everything as we do a stock?
After all, what is a stock? It used to be a piece of paper that sat somewhere. These days, like everything else, stock ownership has gone digital. So, you just have to take someone’s word for it that it actually exists.
“The system works as long as we all buy into the underlying premise — that an item representing ownership is the same thing as ownership. If we could do this with food, we’d put a quick end to world hunger. But no one seems able to treat a certificate representing food as food itself.” — Anon
FIRST OF ALL, THERE’S NO WAY WE COULD HAVE PREDICTED THE OTHER TEAM WOULD MAKE MORE RUNS THAN US