Short term thinking and investing

This is pretty much my thinking. I doubt there’s anything to be done about it, but I don’t think it’s good for the country.

We all suffer from a remarkable degree of impatience. We live in a world of sound bites, and the sense of instant gratification permeates every corner of our society.
In my chosen field of money management, the expression “long term” is an endangered species.
Consider public policy, executive compensation, the manner in which we communicate and the investment business.
Public policy: Hard, thoughtful political decisions are discarded in favor of short-term and popular decisions. In the end, these decisions are usually more costly.
Executive compensation: Many of our business and investment managers have gotten away with a “heads I win, tails you lose” mentality over the past decade, and it nearly destroyed our financial system.
Communication: In our social lives and in the way we communicate, convenience, expediency and haste rule the day. Speed dating and texting have replaced romance and conversation. Even texts are abbreviated as we now tweet. (Literacy and SAT English scores must be on the descent!)
Investment business: Demands on short-term investment performance have intensified and have never been greater. Short-term decision making and trading (what I describe as worshiping at the altar of momentum) has increasingly trumped intelligent, analytical and thoughtful long-term investing.
In the business media, the staccato pace of CNBC’s prime time “Fast Money” and “Mad Money” shows make them so popular, as do their Fast Messages and Lightning Rounds. (“Slow Money” and “Sane Money” would not make money for CNBC in today’s world.)
Investors in mutual and hedge funds have become ever more conscious of short-term performance. As a result, few money managers have the luxury of “forever” as Warren Buffett’s Berkshire Hathaway (BRK.B) investor base grants him. Indeed our investors’ capital is now almost “call” money, as multiyear hedge fund lockups have morphed into monthly and quarterly redemption privileges for their investors.

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2 responses to “Short term thinking and investing

  1. You can't handle the truth

    I had a conversation with a client of mine several weeks ago who’s been a successful fund manager for years and he’s just exasperated with the market. He’s so used to investing long-term for clients and doing well and now he finds it almost impossible because his fellow investors are pushing for short-term gains and creating so much volatility in the market its almost impossible to find value.
    He said he’s prefer to take all his clients money out and wait on the sidelines but he knows if he does that his clients will go elsewhere.

  2. Anonymous

    Many upsides and downsides to fast vs slow, innovative vs sclerotic, risk vs reward, liquid vs illiquid, short-term vs long term

    Unlike 25 yrs ago (before rapid-fire wealth creation waves of modern, entrepreneurial tech and hedge fund industries), much easier for a smart 35 yo today to “retire” as a wealthy guy from the allegedly too short-term, too risky, too creatively destructive world of tech or finance where one is a fiduciary for outside investors
    And invest own money answering to no one
    And set own time frames and risk parameters on one’s capital
    Not that complicated a solution for those independent, creative thinkers truly seeking to live life on own terms, as opposed to underachieving complainers (usually Luddite commies or trust fund kids of some kind) claiming life was so much better or more fair in past, blah-blah