Submitted by South of Wall Street
Performance Anxiety - Thanks Cramer
Performance anxiety can, whether you're honest about it or not, cloud your decisions in this market. Do you cave to the relative performance derby in order to retain investors? Its a real issue if you've been on the wrong side of this market or any side for that matter. The volatility has made investors punch drunk. I'm talking about customers that say flat out: "If you don't get more invested, I'm pulling my account". How quickly they forget that 2 weeks ago they were of the opposite mindset.
Let me share my story - as I'm sure there are a million like it. I've been receiving daily calls from an investor for the last 3 months (yes, I should have already fired him). We've been in 70% cash, which two months ago - in his words - enabled him to sleep at night. Now he can't sleep and is constantly hyperventilating at all the money he is "losing" by being under-invested. Cramer put him over the edge last night, with something to this effect regarding money managers:
Publicly, they’ll stick to their guns and spin negative tales. But privately, they will be forced to buy because they’re so far behind in the market that their investors will demand their money back unless they change direction.
The investor called today to say that we had until the end of the day to be fully invested in his separate account. After hanging up - there I was: make the decision about whether to retain the assets or go against my better judgment and professional opinion. What's on the line ? Pride & Fidicuary duty vs. annual management fees.
Congratulations Cramer. The average investor is listening to you and is about to take it on the chin once again. Those of us in the real world, who prudently manage other people's money, don't change our stance daily (sometimes intraday) like you do in your nightly poison spew. We get paid to take a stance and be right more often than wrong... but most importantly...not lose money. You get paid to sing and dance, and investors get hurt by your cowboy bullshit.
What am I going to do about the investor?
I'm liquidating his account and sending him this book by Howard Marks with a note that says, "You should read this. Good luck."
Now I'm no saint. I'm just another guy, in the most overpaid industry in the world, trying to make a buck. If this investor was more than 10% of AUM, I'd be forced to reconsider. And if we had 20 investors with similar demands it would be a difficult call. That's the truth and that's reality.
The point is: please don't listen to Cramer - he really is an idiot.