Each are little more than momentum plays.
A momentum play is when you decide to invest time, money, energy, attention or view something only because it is moving big in one direction (or at least it appears that way), but you really know nothing about the fundamentals of the person, company, country, subject matter, beliefs, law firm or whatever into which you invest.
It is often referred to as a "momo play" as well. And, what really sets it apart is that the momentum or perceived momentum is really just in one's head. It is no more than a hunch. In short, just like all of those that decide to buy a lottery ticket only for the reason that everybody else is doing it, a momentum play is nothing more than gambling. Maybe you will get what you want for your investment, but it is very unlikely.
Whether we are talking about business capital, operating capital, political capital, personal capital or the prospect of a payout, the investment is usually a zombie, meaning it has a negative net worth. This is because momos have nothing to do with assets, or earnings, or security, or anything else. It is terribly intangible and it is build on image and pageantry.
Some like to refer to this as the value of potential, and certainly in some things like undervalued real estate this might sometimes be true. But, it is true for the opposite reason. The real estate, for example, has no momentum or it has negative momentum in a market that is otherwise determinable and rational. In short, nobody wants the property because of perceived problems, but if one can fix those problems the market has comparables on which the asset can be rightfully judged.
It really does not matter if you bought tulips in the Netherlands in 1636, tech stocks in the 1990s, or shorted the investment banks in 2008, the challenge of any momo play is knowing when to get in and get out. Every momentum play contains stories of someone or some company in which the investment paid off, but generally speaking most everybody fails. Again, much like a lottery your chances of winning by buying a lotto number is not too statistically different than if you did not buy a number at all.
Like the tech bubble of the 1990s, these companies did not have just bad fundamentals. They had NO fundamentals. Nobody could tell you how these companies made money or how they would every make money. Like all momo plays, it was all about the story and not about reality. People, companies, retirement plans, hedge funds, all bought into the stories not because of anything real, but because the story had propelled the momentum of the tech stocks upward. They were buying on momentum in other words. All of it was nothing more than a flash in the pan, but it was exciting while it was happening. It proves your mother's theory that if "everyone" jumped off the Empire State Building, that you would to. And, that is what is wrong with momo plays. In your mind you know it is not right, but you think highly enough of yourself to be able to judge when to get in, ride the investment up, and exit before it all comes crashing down. But, it all will come crashing down. It always does. It come crashing down because it is not real. It is a story based upon window dressing.
There is really a fine line between momos and pyramid schemes.
Did you know, at least in regard to momentum stocks, it takes the average investor looking for momentum plays two full days to act on the good feeling. Yet, it takes a hedge fund 45 minutes to act. In short, the engine behind the momentum is being driven by the hedge funds, and the momentum has nearly peaked or it is starting to fall by the time most investors decide to get in.
What does that have to do with Sarah Palin?
I viewed an interesting video of one of her very large book signings. The reporter did not ask any leading questions, but he asked each person waiting in line what Governor Palin's position was in regard to that person's own issues or interest. Nobody but nobody knew the Governor's position on anything. In fact, nobody could begin to articulate her political philosophy or beliefs. More interestingly, even though the Governor stood for nothing they could express, they all see in Palin as a champion of their own, often conflicting, political positions and causes. The book signing goers were all starry eyed and excited she might be a candidate in 2012. They were all there because of the story and because of the momentum arranged by her publisher behind the events. I was thinking, most of these people were investing a lot of emotional well-being in this gorgeous girl, without even an inkling how that jibes with what they want or believe, and all of that heavily invested emotional intelligence is going to be crushed later on as a result.
Now, I would say the same thing about Barack Obama in the Democratic primary and caucuses last year, except he has been elected president and many of his supporters that invested money and popularity in him are already disillusioned. Why? For the same reason as explained in the Sarah Palin example. They projected their ideas for change on him and otherwise did not know his belief.
Dubai is a small city state. It is nothing more than a sweltering strip of sand with a deep water port. Unlike the rest of the Arab Emirate it has no oil production of which to speak, and it nothing much else of value. Yet its ruler, Sheik Mohammed bin Rashid al Maktoum, lured investors in to the tune of $80 billion with futuristic projects. All these things represented mere grandiose ideas that somehow portrayed Dubai as a hub for the Middle East, Western Asia an Africa. But, it was not such a hub. Maybe because of the allure of oil in the Middle East (which, again, Dubai does not have), or the vision of grass golf courses in the desert, topped by the largest building in the World, western, Russian, Arabs and Iranians poured the money in to transform the little territory. Forget that there were not tenants for the buildings, or enough buyers for the islands and houses. The point was that it was all show. A hub for commerce is an intangible thing. It did not have that intangible thing. So you try to make it so by borrowing money and creating tangible things as a replacement for what you cannot see.
Lawyers and law firms are the same way. The law, and the selling of services, is terribly intangible. It is generally not visible. By its very nature, lawyers have to sell something that is imaginary. Many of these lawyers do not actually have the business, or they want to appear as the top honcho in the practice area. Like those involved with momos, they want to be reflected as connected and powerful. So, they sell flash. Like Dubai, they try to turn that intangible into something tangible.
How do they do this?
Start off with a high rise or very visible office of glass, marble, granite and mahogany. Add, the best of furnishings and systems. Add further law school credentials of your underlings Add staff, lawyers, contractors, agents and representatives to lord over. Add an actual book-based library to symbolize the law. Then buy a big house in an influential part of town, joint he right clubs for social status, and get a big, expensive car in which to commute and be seen. Then, of course, you have to dress the part and they have suit makers that can do the trick. Go shopping four times a year for business wear so the style is all current. Then there are $50 to $100 hair cuts. Add expensively designed websites and faux social network sites in which you hire ghosts to author the pieces.
It is all done to impress in a visible way where the intangible law cannot. But, make no mistake about it. Whether it is articulated this way or not, it is all done to simulate a momentum play. It is intended to get clients to move toward the firm believing that is where the momentum is going. But, none of it is real. And, the cost of it has real consequences either in the survivability of the firm in this tech age, or in the fees charged the clients (investors), or both.
My point is that we, as lawyers, do not need this drama. It normally turns into exploited clients, ruinous law firms, broke attorneys, and LA Law images of attorneys that are just so unnecessary or true. If you are a lawyer you need to avoid the temptation of the momentum play. If you are a potential client you need to avoid drama involved by investing your resources is these image firms. If you are a landlord, it is nice to lease a floor or two of space in your shiny skyscraper, but the painful dissolution of the firm later will be harmful. If you are young staff and law school graduates, it means more personal debt and a wasted part of your future life. And, all because some lawyer thinks he or she is hot stuff.
It is not worth it for anybody. So, keep the endorphins in check, do not fall for the hype, put your emotional investments under great scrutiny, and avoid the momo firms and practices.
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