How many of us remember the great stock market crash? I don’t mean the 1929 crash, I’m talking about the Black Monday crash in October 1987. To this day no one has offered an accepted assertion as to why the stock market crashed that day or why the market has been so volatile over the last 12-14 months.
Because humans are capable of hubris. No other creature on the face of this earth has the capacity for hubris. Humans rationalize everything. We rationalize why we take something from work (“I’m only borrowing it.”). We rationalize why we don’t give back the extra money when a cashier gives us too much change (“Hey, Wal-Mart makes too much money so they can do without this thirty-eight cents.”). We rationalize snacking from the produce aisle at the grocery store (“I’m hungry and they won’t miss it”),running through yellow lights (“I’m late for work”), and playing the numbers on tax forms (“I can make this deduction work”). Problem is, when we rationalize something, we are telling “Rational Lies.” These little rationalizations are how we placate our conscience when it tells us that we are doing something that we know is wrong. It is this habit of rationalization that gives rise to hubris.
Hubris is defined by the Merriam-Webster dictionary as: exaggerated pride or self-confidence . Humans have always believed that they are the top of the mental food chain – that we are all smarter and therefore better than the other animals of the wild. In many ways, we are. We have the ability to rationalize anything both the good and the evil. We can make deductions based on evidence placed before us and we can even extrapolate information that we already have in our possession to plan for most any outcome. While we cannot predict the future, we can certainly plan for it.
Hubris is strictly human. No other animal can display hubris because no other animal can think like humans. Like it or not, ol’ Phydeaux sitting there in the corner doesn’t remember that last week you played fetch with him at the dog park. He just knows that if you pick up the ball, he’s ready to play with it and you. If Phydeaux craps on the carpet at four in the morning, your beating him for it at 6:30 doesn’t connect in his brain. In his mind, here’s poor ol’ Phydeaux getting the snot beat out of him for greeting you in the morning with a smile and wagging tail. Cats are the epitome of apathy. They don’t care regardless. If you catch Snowbell craping on the rug instead of her litter box and you beat the snot out of her, she doesn’t give a rat’s ass. She’ll walk away from you like nothing happened. Of course later on, you’re liable to find your drapes shredded, but hey, it’s not like it’s revenge or anything. Remember clawing things is a natural instinct for cats and at that moment your drapes happened to be something new with which to sharpen her claws.
Humans, though, are a creature unto themselves. They carry grudges and will often as not go out and get revenge. Just look at the stupid street thugs that keep shooting each other because someone “dissed on my sister!”
Investors are no different than street gangs – except on Crenshaw Boulevard they use guns and on Wall Street they use money. Thugs on Crenshaw (sounds like a store where gangs can buy their “colors” – if anyone uses that name, I get royalties dammit!) wear baggy pants that need to be pulled up because their underwear is showing. Investment bankers on Wall Street wear Hugo Boss suits. Both harbor a lot of hubris. The difference is how they use it.
But the thugs of Wall Street are crying a new tune today. It seems that since JPMorgan/Chase has offered to buy out Bear Stearns, many on Wall Street want J.P. Morgan’s head on a platter. Bear Stearns stock closed Friday at $30.85 a share and the JPM/Chase offer made over the weekend is a mere $2 per share. No, that’s not a typo, that’s two dollars a share -- $28.85 less than the closing price. And the share holders are not loving it! In fact, many are considering suing either JPM/Chase or Bear Stearns or both claiming they were mislead.
My one word response to them is: “WA-A-A-A-A-H!” After which I say, “Go sit in the corner, suck on your thumb and whimper you bunch of crybabies!”
Sure Bear Stearns CEO Alan Schwartz went to the public last Wednesday and told everyone that everything is fine and that Bear Stearns has $17 million “in the bank” . But who remembers the crash of 1987? Yeah, remember that? Everything was fine when we all went home that Friday night and on Monday morning October 19, 1987, stock markets all over the world were suddenly losing points – New York was no exception.
Anybody who invests in the stock market has to have some level of hubris in him otherwise, he’s a cheap wimp who’ll never amount to anything. But these fools looking at suing over the Bear Stearns sell out are whining, crying and whimpering because they think that they’re going to lose money. I believe the new term is “feeling Enroned.” When a company buys the one you happen to own, you exchange your stock for stock in the new company and if that company’s new stock is higher than what you had to begin with then guess what? You just made money!!!
Furthermore, these whiners think that by suing they’ll get their money back. Let me tell you something about lawsuits – especially class-action lawsuits. The only people who make money in a class-action lawsuit are the lawyers. Case-in-point: a recent lawsuit filed in Los Angeles County on behalf of home buyers in the Antelope Valley was intended to help the people because of shoddy construction. The average cost of the homes included in the lawsuit: $320,000. The average amount of each person’s cut of the proceeds from the lawsuit: $6,000 – a little over 20%. Oooh, ah, where-can-I-sign-up? If you invest $10,000 in a company’s stock and you sue, you’ll be lucky to see $2000 when it’s over. Your take might be a mere $200.
The stock market is a risk. It is a BIG risk and only people who are good with numbers and business sense should play. The Internet has made day-traders of everyone and actually harmed the market more then it has helped. People buying and selling on the short term is no way to make big money in the stock market. Any investment strategist worth a dime will tell you that if you want to make money in the stock market, you need to buy and hold long term. The day-to-day volatility of the market is bad for the get rich quick mentality of today’s America. Besides, then there is the capital gains tax you have to allow for and it will get you when it comes time to sell your investments assuming you have made money.
I have no sympathy for the stock holders of Bear Stearns. They knew getting into the market would be riddled with risk. If they end up losing almost $29.00 per share, that’s the price you pay for investing in business. There are no guarantees that any business will stay around forever. Ever heard of C. R. Anthony & Co? Go look them up on the Internet and you’ll see that they don’t exist any more. What do you say to the people who owned stock in that company when it filled Chapter 11 in 1997?
To the stock holders of Bear Stears, I say, get over it. You knew what you were getting into when you bought stock in a publicly traded company. You should always read the fine print where it says, “Past performance is no indication of future returns.” Besides, if you get any money at all for your stock, it’s like my grandmother used to say, “Part of something is better than all of nothing.”