The Working World

Out on the Street: Hope Springs Eternal

“Joe the Trader” chronicles his experiences with life after Wall Street.

On March 15th, in a remarkable show of transparency for a Federal Reserve governor, Ben Bernanke was interviewed on 60 Minutes. He sounded much like Chance the Gardener from Jerzy Kosinski’s Being There. In the classic novel and later movie, a simple gardener is released into Washington D.C. after the death of the man he has spent his life working for. Taken in by an advisor to the president who mistakes his name for the patrician sounding Chauncey Gardiner, Chance charms everyone with his botanical observations, which are misinterpreted as sage economic, financial and political allegories. In the spirit of the season, Chairman Bernanke said he saw signs of economic green shoots emerging. I sure hope that his comments were more valuable than a rambling gardener’s.

Than again, I’m not big on hoping. As a professional investor, I knew that if I was ever hoping, I was in trouble. It was my job to assess risk. It was my job to examine the merits of an investment, to know its pros and cons, and most importantly, to know when the facts had changed and I needed to get out of my position.

The last time I hoped for an outcome was in November 2008, when I owned some illiquid Nigerian bonds. Only one bank in the world traded them and they didn’t want to buy mine at any price. So I had to hope that the bonds and the Nigerian Naira didn’t fall in value. Needless to say, hoping didn’t help me much.

At this point, most of my net wealth is tied up in completely illiquid investments, either the restricted stock of my former employer, which vests to me over the next three years, or the house I am still long in Westchester. As a result I am close to powerless in managing the risk of my positions. Buying long-term put options on my stock to protect the downside is prohibitively expensive and I have no clue how to hedge the value of my house. Fortunately, since Chauncey Bernanke has spoken about the emerging economic greenshoots, U.S. stocks have rallied 25%, the value of my restricted stock has doubled and maybe even the value of my house has stopped falling. At the very least I should be relieved, at best I should be thrilled. So why do I secretly wish the market would go down?

Could it be schadenfreude? Have I become that bitter guy who thinks it wasn’t fair he was fired while Mary and Dave still have jobs? Am I so miserable that I would welcome more economic and financial pain on others? Surely the last thing I need as I hunt for a job is more Wall Street layoffs.

When I was trading it was a backhanded compliment to be called a good bull market trader. You might be making gobs of money, but the implication was that you were just riding a trend and following the herd. When I consider my trading career, I certainly benefited from the global bull market but my good performance wasn’t solely due to this trend. Instead I remember best the contrarian bets, the ones that caused senior management to question my views, which eventually turned out to be right. I remind myself that my performance in 2008 wasn’t that bad and I managed to make money in the difficult second half of 2007. But when I allow myself to be as honest as possible—when I go there—I realize that now I want to show everyone that I am not a bull market trader. Everyone wants the market to rally, but not only do I distrust hope, I want to distinguish myself from the herd.

So while I should have the pompoms out cheering for the rally from the sidelines, I can’t help but to have bearish wishes, if only to prove that I haven’t lost any mphs on my fastball.

Joe the Trader spent 11 years as a proprietary trader at a major U.S. bank. He has three children and currently lives in Brooklyn. Read more of his Out on the Street column.

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Tags: Out on the Street, personal finance, real estate, stock market, The Working World, Wall Street