The Future Again

How did your day begin? While flipping through my morning’s stack of financial news, I came across an article predicting another recession, soon. “Damn,” I thought, “I haven’t paid off the last one yet.”

But then, another article appeared in the very same paper announcing that a hedge fund near where I live is about to close on a new $100 billion fund. The article went on to discuss how investors are starting to get their appetite back for riskier investments. Investors, wanting higher earnings on their savings, have apparently grown weary of the life raft of safe investments many of us jumped to during The Bear.

“Finally!” I heard Wall Street cheering. “If it’s more risk they want, it’s more risk they’ll get!” One unnamed source reported hearing the CEO of a formerly government-bailed-out financial company excitedly yell into the phone: “Tell them all — when they get out of federal prison we’re getting the band back together!”

You knew it had to happen. At some point this whole “safety” thing was going to get old. No matter how much financial trauma was endured, when the neurons start re-firing, the memories of rising stock and housing markets begin dancing in the head. Risk versus reward. “If I could get a little bit more reward, I’d take a teeny bit more risk, sure. Who wouldn’t?” we begin saying to ourselves.

We all know how this ends. Can we really be that predictable (of course we can)? As our thirst for risk increases, we start hearing of investments that require an extensive Power Point presentation and handouts to explain. Can Armageddon be far behind?

The good news is (as any Wall Streeter will swear) prior to Armageddon, there’s a hell of a lot of money to be made. Their challenge will be to come up with an investment that we’ll all believe. After fooling us once with Credit Swap Derivatives, they know they are going to have to be creative. Hey, whoever said having a place in the Hamptons AND Aspen was going to be easy?