Even the Odds: Sensible Risk-Taking in Business, Investing, and Life by Karen Firestone

Author:Karen Firestone [Firestone, Karen]
Language: eng
Format: epub, mobi, azw3
Publisher: Bibliomotion, Inc.
Published: 2016-04-26T06:00:00+00:00

PART 3

Investing

CHAPTER 9

The Bubble

The stock market is a great equalizer. Those of us who live, work, and play its daily game have great respect for its power or we simply do not last. My career as a fund manager and analyst has shaped my understanding of risk and the way we can appraise its elements. The examples throughout this chapter highlight some of the most interesting people I have worked with as well as lessons gleaned from my life in the market. I’ll also outline the role of sensible risk-taking in addressing the market.

I am not much for hyperbole, but the period between early February and late March of 2000 was among the worst of my life. The new millennium arrived benevolently, amid quickly dissipated Y2K fears that preyed on the possibility that systems from traffic lights to global banking networks would crash. Little did we know that a different type of crash was imminent, one caused by the blatant disregard of sensible risk-taking. The 1999 Internet-dominated bull market carried into the opening weeks of 2000, at which point most of us were somewhere on the spectrum from euphoric to bewildered.

Even those of us who recognized the insanity of the tech bubble could not help but glow a tiny bit with our own participation in, and even contribution to, the strongest market surge in our lifetime. Through 1999 and into the early days of the new millennium, numerous stocks jumped 10 percent a day with regularity. Investors poured money into our funds at Fidelity quicker than you can say “401(k),” and it was our duty to put that money to work. With greater sums invested, however, your position becomes even more vulnerable to the effects of a downturn.

The funds I managed eclipsed $10 billion that year as I outperformed my benchmark. However, life is more than your last quarterly results (although it doesn’t always seem so). My mother had been sick for several years with a neurological condition that manifested very much like Lou Gehrig’s disease, but with the devastating-sounding name of multiple system atrophy (MSA). I tried to visit her every day on my way home from work, arriving home much later than was ideal for my four teenage children.

My mother-in-law had likewise just been diagnosed with a very aggressive form of lymphoma, and by early February of that year, the prognosis looked dire. On several visits to Massachusetts General Hospital, I recounted the wild leaps of stocks such as Yahoo, Broadcom, and AOL to my father-in-law. I described the gravity-defying action of the tech and biotech stocks, along with their unrealistic prices, but I was reluctant to sell them for fear of losing performance relative to my benchmark and competition. There appeared to be more risk assigned to not owning these companies in my fund than to holding them despite their very high valuation.

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