In Finance and Politics, Greed Isn’t Always Good

In all our frenzy, we seem to have lost sight of and a hold on reality.




Barack Obama and Mitt Romney will square off Wednesday night in the much anticipated first presidential debate of the 2012 election cycle. This confrontation has been hyped for weeks, months even. Media is big business, and the boon provided by a race for the highest office in the land comes around but once every four years. Certainly it must be taken advantage of, leveraged properly.

As such, the precursors to the evening’s event have been countless journalists and pundits continually highlighting which tactics each side must execute if they are to consider their respective performance a victory. There has been no shortage of content — everyone is on the bandwagon, from Charlie Rose to The View, Bill Maher to Bill O’Reilly, and even yours truly. But, in all our frenzy, we seem to have lost sight of and a hold on reality.

When protégé Bud Fox (Charlie Sheen), in the infamous motion picture Wall Street (1987), confronts his idol Gordon Gekko (Michael Douglas) on plans to make a dollar by completely obliterating company BlueStar Airlines and its employees, Fox asks sternly, “So tell me Gordon, when does it all end? How many yachts can you waterski behind?  How much is enough?” Gekko’s response: — now part of financial folklore — “It’s not a question of enough pal. It’s a zero sum game — somebody wins, somebody loses. Money itself isn’t lost or made; it’s simply transferred — from one perception to another.  Like magic. This painting here (referring to a Rothko hanging in his office,) I bought it 10 years ago for $60,000. I could sell it today for $600,000. The illusion has become real. And the more real it becomes, the more desperate they want it.  Capitalism at its finest.”

In United States politics, the illusion has become real. And the more real it becomes, the more desperate we want it.

Like politics in recent years, financial markets too have become an act of magical deception. Markets are no longer a simple mechanism for ownership representation. Rather, financial markets have taken on a life of their own. They are less about corporate valuations and more about desperate desire — to make money at all costs. Instead of providing a glimpse into a company’s operations, earning reports have become the base from which investors wildly seesaw between being winners and losers. Stocks are not purchased for the long-term quality of the underlying corporation, now serving the much different purpose of chips in a casino where everyone rushes toward the hot hand.  And, like politics in recent years, financial markets have become a zero sum game — somebody wins, somebody loses. Money isn’t lost or made; it’s simply transferred — from one perception to another. Unfortunately, the only true beneficiary is he that facilitates the magic.

Because of greed, we all want the illusion. And we want it so badly, we are willing to forego all common sense, better judgment, and oftimes morals in its pursuit. But, as the movie’s main character learned the hard way, capitalism can be a ruthless mechanism if overtaken by illusion. When we transfer money (or power) from one perception to the next without regard to substance, we make only the magician wealthy while exaggerating a coming collapse when reality finally strikes back.

In 2012, both financial markets and politics have been entirely hijacked by illusions that threaten the very foundation of society if we do not learn the lessons of Bud Fox and BlueStar Airlines. In your portfolios and your ballot, challenge yourself to find the investment or candidate that does not simply fulfill a desire. Approach markets and ballots, and pick your candidate and your investments with an open mind. And, dare yourself not to react, but objectively interpret ideas and data for their true meaning. Financial booms and political candidates are ultimately built of our perceptions. Thus, if we do not curtail our greed and preconceived biases, both our political system and our markets will sadly find themselves losing everything in the poor performing sequel still to come.

“Capitalism at its finest”?  Well, though Michael Douglas won the Academy Award for Best Actor, Gordon Gekko went to prison. Capitalism at its finest trumps all illusions and the magician eventually will pay.

Jonathan Citrin is founder and CEO of CitrinGroup, an investment advisory firm in Birmingham, MI. He is an adjunct faculty of finance in the School of Business at Wayne State University, and a national speaker on financial theory.

Contact: 248-569-1100 or www.citringroup.com.

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