The Red Pill

Wall Street traders (bless their dark souls) hold that there are two kinds of personalities – the stock type and the bond type. Stock guys are thought to be optimists while bond people have a gloomy reputation. There must be some truth to this because in ten years I have not met a bond manager with a sunny disposition.

Thankfully, Morpheus’s medication did not offer Neo a glimpse of the bond matrix. That’s one rabbit hole even he couldn’t have got out of easily.

Luckily, most of us are stock-people. We extol and defend our favorite stocks to the point of irrationality. In the meantime, it is forgotten that the bond market dominates the economy in a way that stocks never have and never will.

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Jessica Alba and the Sharpe Ratio

A boiler-plate image of a happy retired couple looking into the sunset at a beach. Sunset images are less popular among financial advisors than ones with greenery and dogs. Advertising executives are of the view that green leaves convey a subliminal message of green dollar money. And the bounding dogs imply vitality – i.e. you will still be alive by the time your investments have matured to the point that you can afford to play with your dog in a park in the middle of the week.

The investing public in America has been relentlessly carpet-bombed with the stock investing mantra. Most financial advisors will repeat it for you: “Thou shalt heed that stocks are the best hedge against inflation, they may earneth thee 10% a year. Buy them ye must!”. And just like the Mormon Church, this is followed up with colorful marketing paper containing smiling pictures of financially secure people and their jubilant dogs.

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Why Stocks and Bonds Exist

The story of stocks and bonds is that of entrepreneurship. In the United States alone, over 500,000 new businesses are started every year. I suppose, having a “boss” is not an easy thing for many people.

A popular US Army recruiting slogan created in 1980. It was changed to “Army of One” just before the real wars began in Afghanistan and Iraq.

If anything, the urge to start businesses is stronger than ever before. A recent survey of millennial college kids showed that roughly 2/3rd of them would like to be entrepreneurs – to “be all that you can be” in the words of Uncle Sam above.

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