History Repeats
Part 1 of a 3-part series –Encore Performance from 2003
On September 21st 2003 I attended a cocktail party at the United States Merchant Marine Academy at Kings Point. It was the day before graduation ceremonies and I had an opportunity to speak with the Key note speaker for the event. His name was Andrew Card, Chief of staff to President George W Bush. Mr. Card as you may remember was the man who first informed the President that the world trade center was hit on September 11 2001.
It was unnerving to hear Mr. Card’s story from the shore of this lush green campus that looked out over the distant New York City skyline, now minus the twin towers. Mr. Carr recalled that day of September 11th 2001, as very typical day at the White House, in a typical Presidential year, in what now, by comparison, had been a very typical Presidential decade. Mr. Card’s first agenda item for the day was a public relation stop at a grammar school where the President was to read to children, discussed politics, and provide a Presidential photo opportunity for the press. It was about mid way through that very average event that Mr. Card Chief of staff to the President of the United States, had to utter the words, “Mr. President, the country is under attack”. Mr. Card said, ‘that they were the most painful and unforgettable words of his life. “I knew” he continued ‘that from that, point on the country and the world would no longer be the same again’.
Listing to his story I painfully recalled my own emotions on the morning of September 11, 2001 and how I remembered being at ground zero only six months earlier, where I was listening to an executive from one of the countries largest Wall Street firms saying, ‘Gentlemen, our business as we knew it, is no longer the same”. I recalled how similar those words were to Mr. Card’s because I knew then that a paradigm shift in our industry had begun to unfold. Because the sentiment in the board room that day was extraordinarily different then at any time that I could remember in my tenure. It had been only three months earlier that Amazon stock closed the day at 15.19 per share down more the $86 from its 52-week high of 102 becoming just another victim of the dot com bubble. But it wasn’t just the dot com melt down alone or the resulting financial blood bath that ensued, that was the reason for shivers to run down the spine of those high-powered executives during that meeting. It was because they knew that things were about to change on Wall Street and never to be the same again.
The advice, counsel, and research, that had been the muscle of these great firms were now clearly under scrutiny, and eventually as we were to find out, would turn into full blown congressional investigations. The exclusive ability of these old Wall Street giants to execute immediate real-time traders had become widely available to a broad segment of the population for a fraction of the cost, the cutting edge financial planning, asset allocation and tracking technologies were no longer limited to them solely, and the price of creating and advocating their most lucrative proprietary products was becoming a prohibitive expense that would eventually be more then financial, and in fact help undermined the very integrity and fabric of their practice.
And it was especially because of people like you and firms like this one that were capitalizing on these weaknesses and creating the potential for an ultimate sea change in the industry that would shake the foundations of these Wall Street giants.
On September 11 2001 the final shoe had finally fallen and it was painfully clear the twenty first century was beginning to live up to its unprecedented futuristic reputation that big Wall Street wire houses had feared.
Two major economic and geopolitical events juxtaposed amid the backdrop of unprecedented sociological and financial change world wide. Capital markets had evolved and so were the way in which we were addressing them.
Stock market bubbles have come and gone, investors and firms have been through tough economic times before, like in 1974 when the Dow was down 27.57%, or in 1931 when it was down 52.67%, and six years latter being down 32.82%, that’s what makes markets. But this time after an unprecedented period of blind optimism the beginning of bear market in 2000 looked a little different, because of the occurrence of a sequence of seemingly isolated events that, to the astute observer signaled, that a subtle but deliberate change was in motion, which would result in a paradigm shift for the financial services industry that was tantamount to the changes of the industrial revolution 120 years earlier.
Part 2 in this 3 part series next week.
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As Frank Burns said, “If I made any mistakes in this article, they are God’s will or someone else’s fault.”
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