The Real World: Wall Street
Monday December 9, 2:46 pm ET
By Jonathan Hoenig
SmartMoney.com
This article was originally published on SmartMoney Select on 12/02/02.
FOOTBALL MIGHT have my Sundays cornered, but the real drama in my life occurs over an exhausting 120-hour stretch that starts Sunday night in New Zealand and ends late Friday afternoon in San Francisco.
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There is no greater sport than the financial markets. The action in baseball, football, even BattleBots pales in comparison with the tick-for-tick drama of the QQQs (AMEX:QQQ - News), Spiders (AMEX:SPY - News) and, lately, even the long bond's TLTs. I don't care how many ESPN channels there are — who needs another highlights show when you've got 24-hour biz cable or Webfn? When you've got money at work — even just a little bit — it's March Madness, the Super Bowl and "Survivor" all wrapped up into one.
Trading is exciting, emotionally draining work. Just as athletes go to the gym and lawyers study for the bar, good trading requires discipline. And more often than not, if it hurts, it means you're doing it correctly. Whether you're managing hundreds of your own dollars or millions of other people's dollars, trading is the worst job you'll ever love.
Where are the reality-TV producers on this one? It has been more than 10 years since MTV debuted the (yawn) "Real World," and from "The Amazing Race" to "Anna-Nicole," there isn't a gimmick that hasn't been tried...save one: the stock market.
That's ironic, because traders, more than any other profession, need to live in the real world. Despite all the research under the sun, anything can happen in the market. There is no sure thing, and when emotions run high, years of success can be ruined with a click or a keystroke.
The fact that Thomas Galvin, Jeffery Applegate and a host of other onetime star investment strategists have recently been kicked out of work emphasizes the brutal reality of a business in which princes become paupers overnight. As the saying goes, you are only as good as your last trade.
And while every market adviser or stock-market guru I know is quick to point out his success, the most important thing in trading isn't always getting it right, but coping when you get it wrong. Sound speculation means using your head, even in situations when it's easy to lose it. After trading everything from futures to foreign exchange, I don't know if I'm better at picking investments that will go up, or simply better at dealing with the ones that go south. Trading is unlike any other job; I don't think one actually gets more qualified — just more numb.
If on TV or in my columns I seem smug, it's only because I'm sedated. The market is tough under any circumstance, and I'm right here in the trenches, struggling along with all of you. From chain smoking Parliaments to gobbling down cartons of Hagan-Daz, I'm one part trader, one part professional obsessive compulsive. I don't have a divining rod or crystal ball. I'm not always right. Every pick isn't a winner. Some months I'm the boy genius, others the world's biggest ass. I pace. I wince. I cry. I worry. And, although I'm ashamed to admit it, I often drive myself crazy.
Economists seem to excel mostly at talking loud and saying nothing. They're always eminently confident in everything except what the market is going to do, which is ultimately what's going to make me money.
Ask a strategist, and the market always seems to move "just as they expected" — and when it doesn't, it's somehow always a company's fault or a short seller's doing. Like economists, their success always seems to rest conveniently on Alan Greenspan's shoulders. Until they get fired, that is.
There are plenty of great analysts, but far fewer who know anything about trading. They live in a world in which "all things are equal" — a place nothing like the real world. Ever wonder why analysts always offer price targets on the stocks they cover, but never loss limits? This is basic stuff for traders.
A trader will tend to speak quietly and in the first person, if at all. Because when uncertainty is the norm, each day provides another opportunity for a trader to put his foot in his mouth. A trader is humble, since it's never the case that something goes wrong, but rather that everything goes wrong at once, and usually at the worst possible time. Trading is the one job in the world in which you start from square one every single day.
What makes the market so compelling, of course, is that it's cruel more often than it's kind. Trading too early, being wrongly sized or being insufficiently capitalized are just euphemisms for being plain wrong. When I lose — and I often do — it hurts.
So forgive me if I'm not always cheery, or don't always feel like talking. The markets are real, and if you're trading right, the pressure never stops. It's a double-edged sword, which is precisely why so many of us can think of nothing but the game.
Jonathan Hoenig is portfolio manager at Capitalistpig Asset Management, a Chicago-based hedge fund. |
