Addicts
cannot see their weaknesses. In his book, Confronting
Reality, Larry Bossidy and Ram Charan warn: "The greatest consistent
damage to businesses and their owners is the result not of poor management, but
their failure, sometimes willful, to
confront reality." Like Wall Street
insiders, they simply cannot admit
the gross mistakes, moral lapses, crimes, and catastrophic errors in judgment
that triggered the 2008 crash. They're
blind to their faults. They don't want
to see them, and they won't. Until it's
too late for it to do any good.
8. Unpredictable:
Wall Street gamblers haven't a clue
about the future
In his book,
Stocks for the Long Run, Jeremy
Siegel studied market history from 1801 to 2000, comparing the biggest up and
down days. Bottom line: Markets are random. There were no obvious reasons for 75% of the
moves that trigger either long-term gains or long-term losses. Wall Street cannot predict crashes. But they can
create them. Finance professors
Terrance Odean and Brad Barber did some long-term research on both American and
China investors. Conclusion: The "more you trade, the less you earn." Yes, returns
for buy-and-hold investors are a third higher than those for heavy traders.
9. Irrational:
Wall Street gets rich off investor
irrationality
Behavioral
economics is the psychology of investment decisions. It's based on Nobel Economist Daniel Kahneman
who essentially proved that investors are irrational. That was in 2002. And investors are still irrational. And yet we still assume we're making rational
decisions! As behavioral finance guru
Richard Thaler once admitted: Wall Street "needs investors who are irrational, woefully uninformed, endowed
with strange preferences, or for some other reason willing to hold overpriced
assets." And so it is that the naive
irrationality of Main Street investors makes the Wall Street crowd very rich.
10. Myopic:
Failure to think long-term guarantees
another crash
Wall
Street's addiction to short-term thinking guarantees another crash. But worse, Wall Street's shortsightedness is
setting up an inevitable global
catastrophe and even the self-destruction of their capitalist ideology. In his book, Collapse: How Societies Choose to Fail or Succeed, Jared Diamond warns that throughout history surviving cultures are always the ones that focus on long-term planning, far in advance of any
possible crisis. Failed societies are
the ones whose leaders "focus only on issues likely to blow up in a crisis
within the next 90 days." And that fits
Wall Street's blind obsession with quarterly earnings, annual bonuses, 1% rates,
no Volker Rule, no reforms, ever, and the attitude that more is never enough.
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