There are some people on this planet that are just so smart or just so uniquely good at their jobs that they are irreplaceable. They seem to have the ability to see what others miss. They get more out of the assets at hand or are able to inspire others to rise above mediocrity. Einstein, a commanding officer I once served under while in the Navy and my high school math teacher all come to mind.
Wall Street money managers don't fall into this category.
If you look at the skill set it takes to manage money, you will find excellent sales skills and a solid background in 9th grade math.
They are not rocket scientists.
Wall Street insiders pay each other hundreds of millions in bonuses claiming it is necessary to retain their top talent.
Just what top talent are they referring to? Could it be the same talent that brought us to the brink to begin with?
Let's face it, Everything a money manager does can be accomplished with an Excel spreadsheet; not counting the requisite coefficient of greed.
There are three basic ways to make investment decisions.
First of all, and the most common, is to guess.
The second is to cheat. Insider trading and nearly everything Wall Street did leading up to the collapse falls into this category.
The third is to do your homework. Look at all of the publicly available information and then make your decision. In the end, this is little better than guessing.
But wait! Aren't the experts, the top talent able to find thing others cannot? The simple answer is NO. they use basic math. They use the same software you can buy online and in the end, they guess.
If there was a secret to winning on Wall Street, everyone would be doing it and the value of the secret would be lost. The Top Talent has less skills than the average high school math geek. They can be replaced.
I recommend a new book by Michael Lewis. It is called THE BIG SHORT: Inside the Doomsday Machine. He was on 60 minutes last night. This guy was there. He did the money market stuff and was amazed that as a 24 year old (he is 50 now) they would give him six figure bonuses for doing nothing special.
Here is what our future holds. Wall Street is unsustainably corrupt. We should fix it but we won't. Why not? There are several reasons, the biggest being that our politicians are either (a) just as corrupt or (b) cowards.
Wall Street will make more of themselves millionaires right up to the point where we are in a worse position than we are now. When that happens, out economy will either irretrievably collapse or, by some miracle, someone in power will stand up and point an accusing finger at our financial institutions and shout for all to hear, "The King has no clothes."
