Thursday, September 06, 2018

Wall Street Leadership Gone Wrong in 2018



The Times today is taking the rare step of publishing an anonymous Op-Ed essay. We have done so at the request of the author, a senior official in the Registered Investment Advisory firm  of Native American Advisors, Inc. whose identity is known to us and whose job would be jeopardized by its disclosure. We believe publishing this anonymously is the only way to deliver important perspective to our readers. We invite you to submit questions about the essay or our vetting process here. 

I Am Part of the Resistance Inside the firm of Native American Advisors, Inc.  
Dean Parisian is facing a test to his presidency unlike any faced by a modern American corporate leader.
It’s not just that the idea of a bear market looms large. Or that the firm is bitterly divided over Mr. Parisians leadership. Or even that his family  fortune might well lose  a few dollars to an opposing investment strategy which might cause a drawdown of say, 5%. 
The dilemma — which he does not fully grasp — is that many of the senior officials in his own company are working diligently from within to frustrate parts of his investment strategy and his worst inclinations.
I would know. I am one of them.
To be clear, ours is not the popular “resistance” .   We want clients to succeed and know that many of its policies have already made clients far more prosperous.
But we believe our duty is to an untested investment strategy  that we read about in Money Magazine.   It is about forecasting a bear market instead of waiting for a bear market to start.
We feel the CEO of the firm continues to act in a manner that is negative to the health of our client portfolios and should lighten up market exposure as the market goes higher.
That is why many employees have vowed to do what we can to preserve our new and untried strategy  while thwarting Mr. Parisians experience and investment moxy. 
The root of the problem is the president’s desire to work hard  us so hard and ask so many questions about "what might happen" in a market pullback that anyone who works with him knows he is not moored to any discernible principles that guide his decision making regarding a market corrections.  He keeps talking about 1986 in bonds, the '87 crash of 22%, the Russians in 1998, the pounding in NASDAQ shares in 2000, and on and on and on, yet he remains fully invested. 
Although he voted as a Republican, the president shows great affinity for ideals long espoused by conservatives: free minds, free markets and free people. At best, he has invoked these ideals in  settings across all aspects of the firm. 
In addition to his mass-marketing of the notion that the markets will again pull back like any normal correction we think he is the “enemy of the short-sellers”.  
Don’t get me wrong. There are bright spots that the near-ceaseless positive message of the firms investment philosophy fails to capture: effective deregulation, historic tax reform, more robust military spending and so much more.
But these successes have come despite — not because of — the president’s leadership style, which is honest and inspiring.  
From the executive branch departments  and senior officials of Native American Advisors, Inc privately admit their daily disbelief at the CEO's comments and actions. Most are working to insulate their negative thinking  from his positive whims.
Meetings with him can veer off topic and off the rails, he engages in repetitive rants about staying the course, staying fully invested, and his impulsiveness often results in half-baked, ill-informed and occasionally reckless humor that never seems to have to be walked back.
“There is literally no telling whether he might change his mind from one minute to the next,” a top official complained to me recently, exasperated by an meeting at which the president flip-flopped on a major  decision he’d made only a week earlier.   "We are going to be keeping the old Keurig Coffee Maker for the foreseeable future!"
The erratic behavior would be more concerning if it weren’t for unsung heroes in and around the firm.  Some of his friends have been cast as villains by other anonymous sources  because they donate too much to charity. But in private, they have gone to great lengths to keep those "bad" decisions contained to the golf course, though they are clearly not always successful.
It may be cold comfort in this chaotic era, but Americans should know that there are adults in the room. We fully recognize what is happening. And we are trying to do what’s right even when Dean Parisian  won’t.  The result is a two-track investment ideology.
Astute observers have noted, though, that the rest of the administration is operating on another track, one where methodology in equal-weighted indexes counters capitalization weighted investments.  
On bonds, for instance, the president was reluctant to liquidate so many of the high yield holdings held in the firm.   He thinks the FED is in a corner.  Raising rates is foolish politically.  He knows raising rates will hurt the owners of the FED and make President Trump irate.  
This isn’t the work of the so-called deep state. It’s the work of the steady state.
Given the instability many witnessed, there were early whispers within the firm of invoking the old trading rule of never shorting a dull market, which would start a complex process for removing the possibility of getting killed in a short squeeze. But no one wanted to precipitate a crisis. So we will do what we can to steer the trading desk in the right direction until — one way or another — that thinking is over.
The bigger concern is not what Mr. Parisian has done to the firm  but rather what we as a firm have allowed him to do to us. We have been elevated so high in our net worths with him and allowed our discourse to be stripped of any pessimistic thought.
Senator John McCain put it best in his farewell letter.  All Americans should heed his words and break free of the bear market  trap, with the high aim of uniting our shared values and love of the great investment strategy of using both active and passive management.
There is a quiet resistance within the firm of choosing to put clients interests first because the SEC won't do it in their quest to make American investors better off in dealing with brokers and brokerage firms. But the real difference will be made by everyday citizens rising above negative thinking and putting money to work with the great leading and entrepreneurial companies, reaching across the aisle between growth and value and resolving to shed the labels in favor of a single one: making money.
The writer is a senior official in Native American Advisors, Inc.

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