Exactly! Over the years, I’ve come to the conclusion that most traders are no different than the professional poker players in Vegas. They just wear suits, instead.
One more thing that really surprised me was the inability/unwillingness of these Wall Street types to see the financial world and economy in a holistic way. I had always thought that traders on Wall Street would be totally knowledgeable about all things financial: accounting, economics, history/socio-political aspects of the economy, etc. During my discussions with some of these higher-level traders, I discovered that they didn’t know any more about these things than some hairdressers do. They only knew about the one asset class (or classes) that they traded, and that was it; they were not “intellectuals” who grasped how their actions could affect other economies or the potential socio-political ramifications of their actions.
While I do believe that some at the very top have a better understanding of the interconnectedness of markets and societies, our global economies are, for the most part, being run by rather ignorant cowboy traders who haven’t the slightest regard for how their actions might affect the rest of the world. It’s pretty frightening when you think about it.[/quote]
CAR,
Yep. Absolutely true about traders on Wall Street. Not everyone on Wall Street is like that. There are some old school type guys that are intelligent, mitigate risk, experts with asset classes, and understand true risk/reward scenarios.
But traders for the most part aren’t really too much different from professional poker players in Vegas. In fact, in many cases, I’ll argue that the professional poker players in Vegas might even be more intelligent because they understand the real world and at least are “street smart”.
I mostly work with high net worth and ultra high net worth folks. Earlier in my career I worked with some ‘supposedly high net worth’ traders. I saw “supposedly” because these guys might be worth 7 figures one day but the next day they would be worth nothing. As you mentioned, they were just gamblers.
Very quickly I stopped working with these trader types because they were a nightmare dealing with. For one, even though today they had lots of $$$$ the next day they would get panicked because they needed funds back as they got themselves in a hole. Just a vicious cycle. And most of them were very very very clueless. They would just yo-yo from being up one day and down the next.
Like you mentioned, you would think they would be intelligent. Understand about different asset classes, understand financials, profit and loss statements, risk/reward ratios. You would think if they are managing tens/hundreds of millions of dollars they knew more than you. Right? Nope. That many times isn’t the case.
I mean these were guys that were making 7 figures yet they were RENTING and not owning a place. They would always tell me how it was silly to buy as they could use that money and turn it into even more money. Yet at the end of the day somehow they never seemed to own anything and many don’t have anything to show for it.
These guys were dining out at expensive restaurants, showering girlfriends with expensive jewelry, taking fancy trips or traveling in first class. Supposedly wealthy guys. Yet, they never owned anything and always tried to argue that they were successfully using leverage.
I remember these guys would kind of rag on me because I preferred to wait and save up to buy a property. I didn’t really want to use leverage and they laughed saying how stupid it was. How they were making tons and tons of money and how they could turn all that money into more money. I was fine just saving and buying a place with cash after I saved up. Yes, very conservative but it was more my style.
So over the course of 20 years I’d work hard, save, buy a place. Rinse repeat. Obviously it gets easier as time goes on as you have more places, have more income and can save up more each year. The thing is the trader types will always say what I’m doing is stupid and how they can make more blah blah blah.
One thing I think is just much different today is we totally live in an “I want it now” society. Everyone wants to get rich overnight when that is just about impossible without taking on massive amounts of risk.
These guys will never understand or appreciate the power of compound interest or charting out a spreadsheet over many years/decades and watching it every year.
Yes, technology vastly improved the trading market. It’s a wonderful thing. But many traders of today don’t know how it was way back before the $7.99 trades. I remember when I first started investing. You had to actually call up a broker and it was wicked expensive. I remember paying upwards of $70 for a stock trade.
Back then you actually had to really think about if you wanted to invest in a company because the commissions were so high. LOL. Now it’s $7 trades and people trying to move with momentum.
It’s ok to trade and I know many successfully do it over a shorter period of time. But very few people that I’ve met that are active day traders are truly successful over a long period of time.
