Absolute Joy and Relative Misery

Michael Steinhardt once said, “Nothing gives a better feeling to a manager than making money for his or her investors when almost everyone else is losing.” I will never know what that will feel like, but I would imagine that similarly, nothing gives a worse feeling to a manager than losing money when almost everyone else is winning.

Let’s examine this a little closer.

Facebook is currently in its deepest drawdown of the last five years. Misery loves company, and right now with the S&P 500 near all-time highs, Facebook investors have little company.

To get a better feeling of how Facebook drawdowns have looked relative to the S&P 500, take a look at the chart below. In case there is any confusion, this is showing that Facebook is currently in a 24% deeper drawdown than the S&P 500. For further clarity, the spike in early 2016 shows that Facebook was making an all-time high while the S&P 500 was 11% off its highs.

This is not the first time that Facebook shareholders have been alone on an island. In April 2014 the S&P 500 was making all-time highs while Facebook was 20% off its highs.

Looking at the growth of $10,000 is the IRR of public markets. $10,000 invested in Facebook five years ago has grown to ~$38,000 today, outperforming the S&P 500 by nearly 17% a year over this time. But the price of gains like this are relative misery, which is a price most investors are unable to bear.


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