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In Defense of Gen
X A common knock on the freshly minted MBAs running mutual funds and Gen X individual investors in the market is that "they've never seen a crash before." If life starts the day one is awarded a graduate degree, that might be true, but a lot of people of my generation have very vivid memories of prior crashes and economic dislocations. Just as one doesn't need to have been part of Napoleon's retreat from Russia or Sherman's march through Georgia to know that war is hell, one doesn't need to have been long tulips in the 1630s or long anything ending in "-tronics" in 1968 to intellectualize what manias are about. Even if one were to argue that a person does need to experience these things firsthand to know their essences, a Gen Xer would reply that a pretty good course on manias was offered by the market in 1996. One needn't have been long some of the outrageous garbage during that period to learn what it's like when greed turns to fear and ruination. In fact, one doesn't even need to be in the market to know about the cycles of the economy. Sitting in the back of the Chevy station wagon, I wondered as I listened to Jim Croce's "Bad, Bad Leroy Brown" why we had to wait in line so long to fill up the car with gas. Later that night, I would wonder during dinner why my parents would be discussing something they strangely called a "wildcat strike at a main vendor." In a parallel universe, someone was selling short Goodyear. Eight years later, I would pay more attention as dinner table talk would turn to financing receivables and inventories and inflation, though at 13 years old I didn't fully understand these subjects. In a parallel universe, a lending committee was discussing calling in loans. In other households in Buffalo, kids might have been wondering if the steel mills would open again or if their parents could hook up with another company. In a parallel universe, growth investors were buying Nucor Steel while everyone else was dumping Bethlehem Steel. A decade later, I had a pretty good grasp on why my Dad would restructure a main division of his corporation, well aware that even a good distributor couldn't cut it in an age of buying direct from manufacturers or ordering from the huge international middlemen. In a parallel universe, Wall Street was rewarding executives for making just such moves. No, I wasn't in the market during these times and I wasn't interested in limited partnerships. I wasn't long South African gold stocks in 1980, and I had no idea that people were buying oil services firms in the belief that oil was going to $100 per barrel. As the progeny of the generation of businesspeople that dealt with the rise of OSHA and the EPA, oil shocks, the S&L fallout, the loss of the competitiveness of integrated steel producers, and the corporate restructuring of the 1990s, I was just as close to what was happening in business as those grizzled veterans of the Street that now admonish Gen Xers to wise up and get into cash. A stock's price reflects in all but the short term what is really happening with a business. Waiting in the gas line and hearing my parents talk about financing working capital, I had little need to know that stock prices were hurting. As an investor in this era of New Paradigms, I haven't somehow forgotten that underlying each stock price is a real business with real world contingencies. I suspect that others of my generation have also mapped their personal experiences over the history of stock prices in the last 30 years to realize the same thing. Next article: "The Sky is Falling" Mentality
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