Is WALL STREET GASLIGHTING US?
Taking off from the film, “gaslighting“ in contemporary usage means a form of intimidation or psychological abuse whereby false information is systematically presented to the victim, causing him to doubt his own memory, perception or even his sanity. In the investment management world, the overarching priority for the vast majority of money managers is to gather assets and revenues and only peripherally to provide quality performance for investors. Gaslighting is routinely used to try to obscure those priorities and to convince investors that, despite the reality of what they see, investing in product X or with firm y is a smashing good idea. [Bob Seawright - Money Management, May 4, 2016]
I came upon this blog while researching what others in the business have written about the “Wall Street” gaslight. My specific experiences were gathered over 30+ years in the advisory business. I tried to be near cutting edge of design and met with and engaged with some truly brilliant award winning academic people over the years. These people weren’t bad guys, or foolish or schemers, they were simply guilty of peddling solutions that had little actual science, coupled with voluminous mathematical iterations, attached to verbose papers making grand assumptions, all which violate a great Jack Bogle quote: “We deceive ourselves when we believe that past stock market return patterns provide the bounds by which we can predict the future”.
My favorite real world example of this came from many interactions with the sales folks and then the higher ups at SEI Corporation. This firm is exemplary, advising, managing or administering for Trillions of dollars in assets. They are the “smart guys” for the smart guys who are looking for better solutions.
So imagine my excitement when I read their
Commentary of Feb 2015 - “Diversification: The Perils of Nearsightedness” an excellent paper discussing how important Asset Allocation is to successful investing.
Commentary April 2015 “Manager of Managers”. Of course!, add some extra security to this concept, makes perfect sense!
Commentary “SEI - Same Ways New Answers - April 2018 - “Diversification: the BORING WINNER”. That also made perfect sense, after all, you don’t chase the flashy untested ideas, you play it slow and steady.
Then I happened to go back and do some more research and came across a Commentary October 2013 - “When Diversification Fails and Why We Still Believe”.
HUH???!!! They KNEW they wrote a paper discussing that “Diversification Fails” yet they STILL published the other three papers!!
EVERYONE ELSE ON WALL STREET - PEDDLE SOLUTIONS TO WALL STREET - NOT YOU! Your advisor ‘wants’ the new solution he’s espousing to work like a charm, but if it doesn’t HE STILL GETS PAID! Only YOU care if it works!
Or, as the old Broker joke says: …. “Mr. Client, I made money, my company made money, and 2 out of 3 aren’t bad sir”.
It’s funny, when i showed the hedge fund administration people my fund concept (which is now Smart Structure Models), they commented “Wow, that works! Every end investor will buy that concept, they’d be fopolish not to.” I excitedely said “so why don’t you guys start using this concept”? Their honest response: “we have 5000 employees and advise to Trillions of assets, we don’t want anyone to know what you just showed us”.
STOP GUESSING! STOP LOOKING BACKWARD!! Just ask and we’ll show you how!