MorningWord 12/31/15: Between a Retweet and a Hard Place

by Dan December 31, 2015 11:02 am • Commentary

If you yourself are not a financial markets professional, your impression of Wall Streeters may come from Hollywood movies like Wall Street, Boiler Room, The Wolf of Wall Street and The Big Short.  All of these movies are based on “true stories”. A common theme throughout, aside from obvious greed, is a lack of civility among market participants.  Based on my own (almost) two decades in the business, I take some issue with the notion that Wall Street traders and bankers are just one wrung up the ladder from filthy animals. Trust me, throughout my career there were plenty of times where I thought I was at the zoo, but those are the exceptions not the rule.

I’d like to tell you about one of the first lessons that I learned in the business. It was during my first full time gig and it involved civility. At 25 I was still learning the rules of engagement as a trading clerk at a hedge fund. It seemed like a locker room mentality most days and nothing seemed to be sacred as far as what you could joke about. But at the end of a particularly brutal trading day for the team, I tried to lighten the mood by offering up a few jokes about what transpired and the money lost. I got a nasty stare and a cold shoulder for a day from my boss.  I got the point. Make fun of his haircut, or his love of the hapless NY Mets, but NOT losing money in the markets.

There were obvious lessons to be learned from that moment. First and foremost, know your place, I was the lowest guy on the totem pole on the entire desk, seen not heard, fine. But the bigger point was when your business’s entire existence rests on making money, losing is NOT a laughing matter.

Which brings me to the present day. As a 43 year old market professional who offers opinions on financial TV, here at RiskReversal and on Twitter, I am routinely shocked at the tone of “trader” banter online. I learned early on not even to make fun of bad trades, amongst friends. Yet there’s a vocal group out there that seems to actually take glee in other people’s occasional misfortune or even simply a differing opinion and can’t wait to come at them from behind an anonymous account.

I can tell you this, these home-gamers spewing invective left and right through social media because someone has a different opinion on a stock, that’s not how the pros do it. And even worse, if it’s a pro relentlessly going after another about the performance of a stock, then that “pro” has likely never made his living solely on their trading/investing results.

A year like 2015 in the U.S. stock market made very few professionals look like geniuses (I suppose there is someone out there that invested solely in the handful of growth stocks that went up). Most professionals were left scratching their heads as to where to find opportunities to invest capital (that is always looking for a home). Its my view that 2016, has a very high likelihood of resembling 2015 from an equity investment perspective. What’s that mean? Simply, a sub-optimal investment environment for new cash (at least at the onset), and a really challenging environment for existing positioning.

That probably means the social media market banter will only get nastier. And that could mean a tipping point for market professionals on Twitter, who may suddenly find the most useful features Mute and Block. And that would be a shame because finance social media would become a heck of lot more like a megaphone as opposed to the interactive network which has always been its strength and greatest potential.

I like engaging readers, viewers and other market professionals on Twitter during the trading day and during my appearances on CNBC. First and foremost, if my “expertise” can be of help, I am happy to offer it. But somewhat selfishly I often hear original, non consensus ideas, and most importantly Twitter can be an amazing real-time sentiment tool, which until recently was nearly impossible to gauge.

Finance social media has a lot to offer, I just hope 2016 brings me a lot more use of the Follow and Reply buttons than the Mute and Block ones.