Jefferies CEO Richard Handler has a new rule for dealing with market volatility.
“We are never as brilliant as we think we are when all is going swimmingly well, and we are never as dumb as we feel when everything goes wrong pretty much all at once and we just cannot seem to catch a break,” Handler wrote in an email he sent out to Jefferies employees late last week.
During October, the financial markets have been absolutely wild. We have heard chatter about hedge fund managers sharing stories of having an uncharacteristically tough time navigating the market.
Trading this month’s volatility has been challenging, but Handler sees it as a “much needed reality check.”
Here’s Handler’s letter:
Subject: Neither Mensa, Nor Fool Be
How quickly and violently the markets, environment, and mood can change. During the summer and even through the often dangerous month of August, the financial markets were generally vibrant, volatility was a word we forgot how to spell, deals were moving forward readily, the global economy was improving and felt almost safe, and we and all of our clients were enjoying solid success. Boy, did many of us feel smart.
Somehow, Labour Day rolled into September and, dare we say it, October. Extreme volatility, European slowdown fears, Ebola, ISIS, the distressed market rolling over in a crowded wave of panic, margin calls, “collapsing” oil prices, redemptions in most asset classes, and a flight to safety once again to the U.S. bond market. And now, many of us don’t feel so smart.
The point we are making here (in case it isn’t completely obvious) is that we are running in a very long and complicated marathon, serving our clients as we work to build Jefferies. Further, the arena we all work in is the most treacherous of all playing fields: the global financial markets. It is not easy to do what we do day in and day out. We believe this recent, somewhat instantaneous and fairly violent change of direction affords us a perfect time to remind each other of a very important and simple rule:
WE ARE NEVER AS BRILLIANT AS WE THINK WE ARE WHEN ALL IS GOING SWIMMINGLY WELL, AND WE ARE NEVER AS DUMB AS WE FEEL WHEN EVERYTHING GOES WRONG PRETTY MUCH ALL AT ONCE AND WE JUST CANNOT SEEM TO CATCH A BREAK.
This rule is unbreakable and is one of the cornerstones of creating long term wealth and happiness. Arrogance and hubris can easily become quick friends whenever one is on a winning streak. People often stop listening to those who disagree with them or, even worse, start surrounding themselves with people whose job priority is to reinforce the sheer level of permeated brilliance. Risk taking increases, because: “why not, I’m really good and smart, damn it!” Elbows become a little sharper because why should someone so brilliant suffer someone who is not? Attitudes towards co-workers, both upward and downward can take an embarrassing turn for the worse. Basically, this is the moment when the wheels just start to fall off the bus. Fortunately, this behaviour is rarely seen at Jefferies, but who are we to say it is non-existent?
When you are down in the dumps, it is easy to just want to blame everyone but the person in the mirror. It is easy to get demoralized and question all the things that just a few weeks prior you accepted as known truths. The thought of throwing in the towel is an extreme and rare reaction, but it is easy to just start going through the motions in a demoralized manner, which only serves to lay the foundation for future mediocrity, and then the eventual move back up occurs and by then you never know how or why it happened.
We do not want to be melodramatic here. The financial markets did not just suffer a 2008 systemic crisis moment. They just had a nice stretch when it was perhaps almost too easy that has just been interrupted by a much needed reality check. As unwanted and painful as this all is, we believe it can be a good thing and can renew our opportunity.
We are building Jefferies and our careers for the long haul. We have some clients who have felt real pain. We have some beaten up individuals around the firm. Everyone is with you when you are on top of the world. True leaders and partners, though, are there to help pick up our clients, our own people, our family and our friends when they are down. We might not all have been geniuses in August, but none of us are fools today in October. Let’s help our clients, support each other, attack the rest of this month and the month of November with a nice bounce in our step, and finish our fiscal year strong.
Moving forward with the confidence of all of us working together,
Rich and Brian
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