Public sentiment has turned decisively against guys like Cramer who make stock picks day-in day-out. General market forecasters garner the same amount of respect as people who stand on the street corner with a bible predicting the end of the world. This is understandable. The market’s crapped the bed and everyone’s lost money. Nobody trusts anyone else.
Last week a video surfaced showing Cramer explaining how to manipulate the market for short-term gains. We defended him saying that it’s all part of the game. Of course, many people flipped out and got in righteous huff. How dare you call investing a game? Jon Stewart was outraged. How dare people on Wall Street play games with our retirement money?
But it doesn’t matter if a bunch of self-righteous people want to spoil the fun. Investing will always have a game element to it.
Eddie Elfenbein at CrossingWallStreet puts it well:
Finance is and has always been a game. I’ve noticed that over the past few years the look of ESPN and CNBC has become steadily similar. That’s not an accident. They’re both graphics heavy, fast-moving, male-oriented and a datanaut’s dream. Heck, the indexes are nothing but a scoreboard. All that’s missing is Gary Glitter blasting away.
Picking stocks and seeing which way the markets go every day is one of the best things about investing. You get to pick a thesis and see if you’re right in real time, and you can make money while doing so. Look, we’re not allowed to do anything anymore. The country has been reduced to be a bunch trans-fat-less, non-smoking, Happy Holidays ninnies walking through airports in our socks. Don’t take this one simple pleasure from us.
I always enjoyed telling a client that the stock they bought last week at $20 is now at $28. That’s an amazing feeling. You made money with your money. I often hear people, professors especially, say that indexing is the only way to invest. Dear lord, these people can take the sex out of anything. They tell us that it’s impossible to beat the market consistently (curiously, they leave out the other side that it should be impossible to lose to the market as well).
Put aside the arguments for or against EMT, people will still try to beat the market but it’s a frickin blast.
And don’t think for a second that this is some new, CNBC phenomenon. Since the earliest days of the market games and finance have gone hand in hand 100 years ago, gamblers were showing up at bucket shops to engage in some straight-up gambling on the stock market. Essentially, they were early derivatives exchanges where bookies paid out winnings based on stock market movements.
Aaron Brown, in his excellent book The Poker Face of Wall Street notes that there are several poker varieties that not-accidentally are named after locations of early financial markets, like Omaha and Chicago. Conversely, there was a commodities exchange in Buffalo, but because it was not a place for speculation, and nobody in that area ever made up a card game named after it. Beyond that: Poker was an early way to efficiently allocate capital, since the upshot was that those who were best at gauging risk and weighing odds would win the most money. Think of a poker table as a proto-bank.
Bottom line is that the puritan anger against CNBC, Cramer and stockpickers is a losing battle. Eddie is right to suggest that there are some people that want to take the sex out of everything, even procreation if they could. Finance will always be in large part about gambling, having fun and trying to beat the house. Interest in that may go down a bit, but it will come roaring back.