An irreverent Wall Street Blog
Thought And Preparation In Wall Street Plague Time
March 11, 2020
I was really annoyed by this headline yesterday on CNBC.com: "Wall Street wants Trump to act within days on virus, or risks for a bigger sell-off and a recession will grow" https://www.cnbc.com/2020/03/10/wall-street-wants-trump-to-act-within-days-on-coronavirus.html. First off, who the hell is "Wall Street" and how do we know what that so-called affinity group wants -- and just who has been deputized to speak on behalf of the entire financial industry?
Odd, isn't it, that Wall Street never wants careful deliberation or advocates letting events run their course. We go through crises and disasters. We suffer the pain and consequences. We commit to studying our failures. We hold hearings. We point fingers. Unfortunately, we never quite seem to learn the lessons and implement the safeguards. When the stock markets are hummin', Wall Street talks a good game about hedges, asset allocation, and portfolio insurance; but the minute there's a hint of trouble, all that rainy-day chatter turns to hand-wringing about the need for an immediate bail-out, central bank intervention, and whatever it takes to get through this. Wall Street talks a good game in the sunshine but runs like a coward in the rain.
We've been here before. We will be here again. Intelligent men and women warned us not to go down the path of folly. Their warnings were dismissed as unnecessary alarms. There were, we were told, no fires. There was, we were told, no smoke. Those in regulation and politics joined ranks and drove those who warned us from the public square. They were shut up and shut down, and cast out like so many demons. If you need a refresher, watch this:
Once we are forced to react to a market emergency, it's generally an exercise of too little, too late, and cross your fingers and hope that this works because it's the last match we have to light, and if this fails, we're gonna just wind up cursing the dark. Consequently, I am uneasy when we find ourselves at yet another moment in history when we're rushing to judgment. I'm not saying that we should or shouldn't do something. I'm just wondering what happened to all those White Papers, Panels, Committees, Roundtables, and Reports addressing the post-mortems for the Great Recession, As I recall, we were supposedly preparing for the next big market break and learning from our past mistakes. Yeah, sure. Amazing how it all goes out the window when there's a whiff of grapeshot in the air.
Notwithstanding my antipathy for metastasizing bureaucracies and over-regulation, I believe in fair regulation and effective regulators -- both in short supply on Wall Street. Missing from regulation and government is careful thought and preparation. As Napoleon perfectly explained:
If I always appear prepared, it is because before entering an undertaking, I have meditated long and have foreseen what might occur. It is not genius which reveals to me suddenly and secretly what I should do in circumstances unexpected by others; it is thought and preparation.
Note that Napoleon speaks of thought and preparation. It is not one or the other. And for all of Napoleon's brilliance, even he had his Waterloo. Regardless, the world is justly unnerved by a highly contagious new virus. Folks are right to be scared. As we all were during the darkest days of the Great Recession. But what happened to all the contingency plans that were discussed in the aftermath of that market collapse? Where are all the proposals and drafts that were crafted in calmer days after thoughtful deliberation? Where is the checklist and the emergency procedures that should be pulled out for just such an event? Why are we, yet again, running around like decapitated chickens demanding action from the White House? I suspect it's because we had an over-abundance of thought but a woeful lack of preparation, all of which is so perfectly captured in this warning:
Vision without action is a daydreamAction without vision is a nightmare
As Wall Street presses Trump to act immediately, let us hope that our dilatory daydreaming doesn't transform itself into our worst nightmare.