Jack Tierney

President, Old Speculators' Club

On the Great Y2K Crash:

I've encouraged all three of my sons to invest for the future, that what is occurring now will pass and that, with their time horizon, it's one of the few ways they can expect to build wealth. My own "success" as modest as it was, and as I have admitted in the past, was not due to any genius on my part. I was in the right place at the right time and, in an unusual move for me, laid it all on the line. If I showed any wisdom at all it was in getting out; when a portfolio consisting largely of mutual funds and some company stock appreciates by over 200% in a little more than four years, only the greedy stick around for more. My current position and opinions, though, are not based on a concern over the next century's performance, but on a far narrower time frame: the next 10 years. I may have done well, but not well enough to sustain another hit similar to that of late '00 and early '01. My current views, then, shouldn't be misconstrued as contrary to your overarching premise. (You may have noticed I used a "more than likely" qualifier in my first sentence. While I believe markets will return to providing a steady stream of growth, I'm becoming concerned that governments, including ours, will demand a bigger share of the take in their never-ending quest to make everybody happy.)

On the Social Process and Markets:

The great missing chapter in asset-pricing theory, I believe, is a model of the social process by which people form and transmit ideas about markets and securities. In addition to studying what influences individuals' valuations, an appealing direction is to study how attention is focused on certain groups of stocks, and the effects of resulting swings in participation"  Is it possible that Lord Keynes suggested that the social process individuals followed might not be similar to a newspaper sponsored beauty contest (with a twist)? Photos of beautiful women would be published daily for a week. Participants aren't asked who they believe to be the most beautiful in that time frame, but who they felt would be chosen as the most beautiful by a majority of readers. The ultimate judgment then has little or nothing to do with the participants' valuations of particular contestants, but a mimetic response to the perceived valuations of others. As has been pointed out numerous times, we live in an age of "information explosion" and that certain providers, at certain times, can cause perceptions to be focused.  It seems that, with a few notable exceptions and declarations of denial, we prefer to be on the more popular (and by inference, winning) side of an issue. With equity markets we are, by nature and historical performance, predisposed to optimism. If this predisposition and those who advocate it prove incorrect we do what humans have done for millennia: we find a scapegoat ("Who could have imagined 9/11?" "Who would have thought corporate chieftains were a bunch of immoral slime balls?" "Were it not for atypical geopolitical uncertainty we'd be well on the road to recovery.") This does not make us any richer, but provides a broad defense and a measure of comfort for mimetic behavior.