When you look at the long-term advance of stocks over the past four decades, an observation worth noting: It was good to be 24 in 84. Meaning if you were young and hungry and happened to work on Wall Street, the world was your oyster. Until it wasn’t.
Risk was rewarded, and a fair amount of luck was involved, disguised as skill. Not that these weren’t wicked smart people like Mike Milken, for example, the father of junk bonds. Because it was Milken who showed corporate raider Saul Steinberg how to storm Walt Disney’s castle with high-yield debt. Steinberg, like Captain Hook, had a boatload of treasure and eyed Disney’s undervalued stock as an easy target.
But it didn’t go as planned.
Steinberg opened up a saga worthy of Peter Pan where instead of a company sold off in pieces, we still have a theme park in Florida and a company once again with a stock price looking like it’s back to the future.
Your Survival Guy reread the saga this summer, Storming the Magic Kingdom: Wall Street, The Raiders, and the Battle for Disney by John Taylor, and one section that stood out above all others had nothing to do with the takeover drama. It had to do with a former rock and roll band promoter who was now working in high finance on Wall Street. “How did that happen?” I thought. He said he needed to be where the action was, and rock and roll had nothing on Wall Street.
Makes my skin crawl.
And history repeats.
Today, with easy money gone and the rockers and rollers back in the studio, they complain interest rates are too high. Gone are the inflated meme stocks and cryptocurrencies.
Look at interest rates and debt, and tell me what the catalyst for price increases will be. The fun may be over.
Markets are a boom-and-bust fantasyland. Risk is never recognized until after the bust and is invisible during it. Pay attention.
Action Line: Your Survival Guy is always focused on risk—the return of assets, not return on assets. Not everyone escaped the 80s unscathed (even if they were in the right). When you want to focus on your risk, let’s talk.
Originally posted on Your Survival Guy.