First person: ‘We don’t believe in luck here’ 

One of the most valuable skills I learned from my parents was how to deal with luck. They taught me how to appreciate the good kind and prepare for the bad. Just as vaccines help prevent health disasters, careful planning can protect against financial ones. 

At the start of 2008, the bull market was still in full swing. A handful of rational voices, Nouriel Roubini, Ann Pettifor and Raghuram Rajan were sounding the alarm loudly on the looming financial meltdown.  

Investment houses are in the business of selling dreams. Naturally, they ignored these warnings.  

Insurance companies, on the other hand, are in the business of selling risk management. They paid attention. 

By the summer of 2008, investors were growing wary. This created a great opportunity for the insurance companies to promote their guaranteed income products. I spent many days on the road delivering presentations on the impact of luck on retirement income. My audiences were insurance brokers. These advisors became my allies. They showed my slides to their clients and educated them about the luck factor.  

On the other hand, the dream-sellers, the investment advisors, hated the topic. Throughout my years in the business, I saw active fund managers try to impress their audiences with the idea that they were better than average. Not one of them ever said that their goal was to underperform the market.  

Yet year after year, SPIVA research results from S&P Global exposed the dismal underperformance of active managers over the long term. This is one of the reasons why the core message of my presentations was to cover all essential expenses with guaranteed income (pensions and annuities) and invest the rest prudently. 

“They will have to listen” 

My favorite client was an insurance company with German roots. My contact person was Michael, whom I’d met at one of my presentations. One day, he asked if I’d be interested in speaking to one of the largest investment houses in the country.  

“Ouch,” I said.  “When I was little, my job was to look after the beehives at our summer home on the outskirts of Istanbul. I had no protection then — just a shower cap. This is worse.” 

Michael tried to soften the blow, “They’re right across from Waldorf-Astoria on Park Avenue. I’ll get WA to cater the lunch.” 

“Then I’d better wear an old suit,” I said. “These guys will probably pelt me with WA’s famous red velvet cakes.” 

In July, the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), which collectively owned or guaranteed half of the U.S. housing market, collapsed. In September, Lehman Brothers went bankrupt.  

The global financial crisis was on. No Monte Carlo model could have simulated such a momentous fractal event.  

The investment firm that we were scheduled to present to was also on the brink of collapse. Federal officials pressured Bank of America to acquire it. Amid the chaos, our talk was postponed to the following year.  

In October 2009, Michael and I finally made our luncheon presentation at the offices of that investment firm. Cheerfully, I walked them through my aftcast charts.  

I use that term because my charts reflected the actual historical market performance, not the usual optimistic forecasts. A roomful of investment advisors listened politely. 

During my final slide, the elegant aroma of lunch began drifting in through the vents. The food was outside, waiting for my talk to end.  

“Any questions?” I asked as the servers rolled in the tables draped in white linen, covered with a great selection of food and drinks.  

A man leaning against the side wall near the front of the room raised his hand. “I’m the branch manager,” he said. “Thank you for your presentation. We do a great job for our clients — we don’t believe in luck here.” 

That was the end of our Q&A. 

As soon as he finished his sentence, the audience elbowed their way to the food tables. Thankfully, no red velvet cakes became airborne. My wife took home a stack of Waldorf-Astoria serviettes as a souvenir. We still have them — too valuable to use.   

With record-high debt levels, shifting global alliances, hostile politics, deepfakes, genocidal conflicts propped up by kakistocracies and armed government forces chasing terrified pickers across strawberry fields, the next episode of bad luck will likely be worse. 

I dare to say that a prevailing lack of compassion may well ensure it. Let’s hope the collateral damage here in Canada will be manageable. 

Over to you 

This is the final entry in my four-part series of first-person articles. I hope you’ve enjoyed them as much as my editor Kevin Press and I have enjoyed putting them together.  

The response was wonderful, thank you. I’m hoping these will inspire others in the industry to do the same. Share your stories — we have so much to learn from one another.