Glory Days

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

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