QOTD: Career Risk as Market Driver

Career risk is highly under-appreciated. I could come up with a laundry list of the reasons for poor market behavior from professional investors. Career risk would be at the top of that list. Incentives matter a great deal more in the decision-making process than most realize.

My friend Ben Carlson looks back on some stuff he’s learned after a decade in the investing business. The gem above deals with one of the least remarked-upon dimensions of how markets behave – the very real specter of career risk that dogs all of us.

The need to participate in gains or not be caught dead investing in yesterday’s losers has a lot to do with why and how markets move. This is why we pay attention to price (technicals) in addition to fundamentals – because of the human element that, in the short term, transcends what asset markets should or should not trade at.

I’ll give you two other quotes that work together with Ben’s on this topic. A match set if you will.

John Maynard Keynes said “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” Keynes compiled one of the best investment track records in world history by building an unconventionally concentrated portfolio. Thankfully, there wasn’t any obsession with benchmarks back then so he could be left alone to pursue high returns without the institution second-guessing him every month. Had he “behaved” in a more conventional manner, there’s no way he could’ve done it.

Here’s one more, an accidental beauty from the bubble-era CEO of Citigroup: “As long as the music is playing, you’ve got to get up and dance.” Famous last words. Ol’ Chuck was referring to his bank’s perceived responsibility to chase after the same returns as the other banks, despite the risks being incurred. In the pre-crisis period, career risk meant falling behind. The real career risk for Prince and his Wall Street contemporaries, however, reared its ugly head soon enough.

When we think about the things that drive markets, we typically mention interest rates, taxes, sentiment, earnings, economic growth, etc. But a need to fit in and the scrutiny of our clients and shareholders is often times every bit as powerful a motivator for our behavior.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. click here commented on Sep 14

    … [Trackback]

    […] Read More on that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  2. lime green wig commented on Sep 18

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  3. blazing trader review commented on Sep 21

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  4. immediate edge reviews commented on Oct 01

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  5. divorce commented on Oct 19

    … [Trackback]

    […] Find More on on that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  6. imitation high quality tag imitation commented on Oct 23

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  7. devops consulting companies commented on Nov 05

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  8. Harold Jahn Utah commented on Nov 27

    … [Trackback]

    […] Here you will find 26634 additional Info on that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  9. replica watch commented on Dec 29

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]

  10. Quality Engineering commented on Jan 18

    … [Trackback]

    […] Here you will find 36862 more Info on that Topic: thereformedbroker.com/2015/02/25/qotd-career-risk-as-market-driver/ […]