Glory Days
by Zach Marsh on Jul 31, 2020
I graduated from university in 1995—22 years old, armed with a Bachelor of Arts Degree in English—uncertain what career path to explore, but certain that the future was expansive and full of opportunity. I had taken an opportunity to move to Chicago and begin a career working on the floor of the Chicago Board of Trade. It was anything but a guaranteed path to success, but I had a tremendous opportunity to make of it what I could. I tried my hand at trading futures on the Dow Jones futures contract before moving to the Chicago Board Options Exchange in 1998. I never worried about taking career chances. I felt that I was ambitious and willing and eager to learn, therefore doors would eventually open.
1995 marked a new era in the Tech Revolution. Windows 95 would forever change the way we interact with our PC and there was talk of this thing called the internet that was gaining notoriety had the potential to change the way we receive all information. 1995 also marked the beginning of a big bull market for tech stocks. In the 4 years that followed we would see tech stocks and stocks related to internet commerce rise to dizzying heights. By 2000, nearly all of us were excited and eager to see how technological innovation would serve us and improve our lives. In 2000, technology meant anticipation and opportunity.
When I began trading equity options on the floor of the Chicago Board Options Exchange nearly 100% of the business was conducted via telephone and open outcry price discovery. If a customer wanted to trade an option in AOL he/she would most likely have to phone the broker, the broker would phone the desk on the floor, the order would be written down and run to the pit, where the floor broker would call out the option to be bought or sold and transact the trade via person to person interaction. This environment created opportunity for people from all walks of life and all educational backgrounds to come to the floor and make a good living. Kids with nothing more than a high school education had the chance to become millionaires, so long as they were willing to learn and aggressive enough to compete. Over the next 10-15 years technology would erase all that opportunity and the number of traders in Chicago fell from over 10,000 to a small fraction of that number today.
Since 1995, the return of the Nasdaq 100 (the most tech heavy index) has risen over 2570% while the returns of the Russell 2000 and S&P 500 indices have only risen by 517% and 617% respectively, with much of the returns of the S&P 500 resulting from high tech returns as well. Since 2009 the disparity of returns has only gotten more extreme. We now know that, in 2000, the euphoria and excitement surrounding technology got extremely over-extended. The 2000 tech bubble was excitement over a future full of promise and opportunity. Today, we see tech prices that seem to echo back to those more illustrious times. Seemingly every day I turn on CNBC in the morning I see “green arrows” showing prices of the biggest tech names rising. The meteoric rise in the Nasdaq seems to represent a bubble, but it does not feel the same. Unlike 20 years prior I do not have the same feeling of optimism. I do not view technology as my trusted servant, designed to make my life easier. Is it possible to have a bubble without optimism?
Today it feels like technology is there to replace us, like my colleagues on the trading floor. Today the changes feel out of control and moving at a speed that creates anxiety and instability. Today it feels like we buy tech stocks not because we love them but because we have conceded defeat to them. This week four of the largest tech CEOs testified before congress. The hearing is designed to determine if these companies have become too big and are stifling competition. Like most hearings in congress this one will most likely yield no changes. But is the problem the size of these companies or is the root of the problem their overall business model? Our society is seeming to fracture, and I believe that the fracture is not just racial tension, but tensions caused by anxiety over a future that seems to provide fewer and fewer opportunities.
My oldest son is entering his sophomore year at the University of Iowa—I want so badly for him to feel the same hope I felt when I was his age, but whether it’s the virus or the general uncertainty, it is hard to give him that hope with a straight face. I cannot tell him what to study to be certain of career opportunity. I cannot tell him which career field will provide the greatest longevity. Unlike the movie the Graduate, where Benjamin receives the one-word advice “Plastics,” I cannot impart such wisdom. Each field seems to be one innovation away from being replaced. How can we not all shutter at these concerns?
But still, in the face of all uncertainty, stock prices rise—or at least the prices of the few winners rise. It may or may not be a bubble, but it seems to be missing something. Perhaps this is a fitting end for what has been called the “Least loved bull market in history.”
Thanks for reading,
Zach and Dave
Disclosures
All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed, constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. Tax laws are complex and subject to change. Calibrate Wealth LLC, does not provide tax or legal advice respect to the services or activities described herein except as otherwise provided in writing by Calibrate Wealth. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.
This material does not provide individually tailored investment advice. It has been prepared without
regard to the individual financial circumstances and objectives of persons who receive it. The strategies
and/or investments discussed in this material may not be suitable for all investors. Calibrate Wealth
recommends that investors independently evaluate particular investments and
strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a
particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Investing in commodities entails significant risks. Commodity prices may be affected by a variety of
factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii)
governmental programs and policies, (iii) national and international political and economic events, war
and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities
and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other
disruptions due to various factors, including lack of liquidity, participation of speculators and
government intervention.
Foreign currencies may have significant price movements, even within the same day, and any currency
held in an account may lose value against other currencies. Foreign currency exchanges depend on the
relative values of two different currencies and are therefore subject to the risk of fluctuations caused by
a variety of economic and political factors in each of the two relevant countries, as well as global
pressures. These risks include national debt levels, trade deficits and balance of payments, domestic and
foreign interest rates and inflation, global, regional or national political and economic events, monetary
policies of governments and possible government intervention in the currency markets, or other
markets.