Some years ago, I worked as a registered representative for E.F. Hutton, in the Madison office. Yes, it was always reassuring to work for a company that had as its slogan, " When E.F. Hutton speaks, people listen."
In this office were competitive and hard working brokers. In fact, overworking brokers. It was hard not thinking of the business 24 hours a day. Mornings began about 7:30am with the telephone report from New York and ended after dinners of pizza, pizza and pizza, and cold calling new prospective clients about investment ideas.
There was one exception to all the brokers. His name was Bruce. Bruce came in when he pleased. He drove a BMW. He had a beautiful wife. He met his clients like a physician would a patient. Sometimes he would not come in to work at all! And when he did come back he would be all tan and tell us of a wonderful trip. He seemed very relaxed all the time. He seemed able to laugh at things that all of us did not think were too funny. All of the other brokers were not pleased with Bruce. It seemed totally unfair.
At this time, I had two young daughters, 5yr. and 3yr, and was working about 60 hrs a week and it occurred to me that Bruce knew something that I did not. So, one day I went in and simply asked him, " Bruce, how do you do it. I just don't understand?"
He smiled and said, " Well, you must understand that everyone here is very bright and has good ideas. But even so, if you honestly plot your ideas and hold the record for a month, you will discover that you will be right only 50% of the time. Try it and you will see. Being bright is not enough. My secret is that I plan on being wrong and use options to prepare for it. He then proceeded to show me on a $1,000,000 investment for his clients how he had protected the investment from the possiblity that he could be wrong. Then he smiled and laughed.
I have never forgot the lesson that Bruce taught me, nor the BMW, the model wife and the style of work that Bruce enjoyed. The crash of 1987 came. Bruce did just fine. His clients were protected. He went on to be a very successful mutual fund manager.
I tell this story for those on the comment line. The good news is that we keep the comments online for review for a year. The bad news is that we keep the comments online for a year.
E.F. Hutton thought it knew so much. In a heartbeat when the market plunged 500 points it was over. Instantly. On the phone from New York, senior staff were urging brokers not to jump from windows, but to get some perspective on what they valued in life. I was in Madison. On the first floor. No place to jump.
As you comment on the blog calculate the possiblity that you might be right? Might be wrong? What are the odds? Is it better than Babe Ruth? Is it better than 50%. Plan accordingly.
Thursday, January 24, 2008
"On Losing Other People's Money----the advantages"---a true story
Senior Partner in a New York brokerage firm addressing young broker trainees.
"Ladies and Gentlemen. One of the unfortunate things about this business is that you are going to take some people down."
(Silence in the room.)
"Yes. I am sure that you will make some folks a lot of money. Lots. But the unfortunate and ...something that you have to consider and come to terms with is that your advice will be wrong sometimes, and people will lose."
And....when you think about learning in general. You may have thought that in your life you learned best from your success.....In fact...I would propose that you in fact learn more....far more...from failure.....Failure builds champions.
The problem of course is that in this business, as I reckon, one has to lose about $100,000 just to become savvy.
And of course one of the reasons you are a broker....is that it is cheaper for you to lose the money of others....than your own money......."
(Nervous laughter......)
His words are something that every investor has to consider when one looks for a broker.
"Ladies and Gentlemen. One of the unfortunate things about this business is that you are going to take some people down."
(Silence in the room.)
"Yes. I am sure that you will make some folks a lot of money. Lots. But the unfortunate and ...something that you have to consider and come to terms with is that your advice will be wrong sometimes, and people will lose."
And....when you think about learning in general. You may have thought that in your life you learned best from your success.....In fact...I would propose that you in fact learn more....far more...from failure.....Failure builds champions.
The problem of course is that in this business, as I reckon, one has to lose about $100,000 just to become savvy.
And of course one of the reasons you are a broker....is that it is cheaper for you to lose the money of others....than your own money......."
(Nervous laughter......)
His words are something that every investor has to consider when one looks for a broker.
Whenever Possible,....buy from dead people
One of the nice parts of buying in an estate sale, is the simple fact that the owner is not there to haggle with you about the price.
Even more attractive is the survivor principle----which says that wherever there is a man with extensive weight equipment, or auto equipment, or xxxx insert here) there is a spouse who, upon his death, says, "Get rid of this xxxx".
Your mission is to be there to pick up the bargains.
Even more attractive is the survivor principle----which says that wherever there is a man with extensive weight equipment, or auto equipment, or xxxx insert here) there is a spouse who, upon his death, says, "Get rid of this xxxx".
Your mission is to be there to pick up the bargains.
"Have A Nest Egg"---Mom's rule
Mom always had a little nest egg of money that she stashed away and over her lifetime she made an obsessive task of using every trick in the book---coupons, special sales, senior discounts, etc. to get this nest egg. She always used to say to me," Dick, I wish you had a nest egg."
So did I.
So did I.
"The Golden Rule"---the trader's version
Years ago there was a series of books on "Thinking of Numero Uno"--or the benefits of self, self, self. Self obsession or greed was touted as in a nutshell a powerful economic tool.
Recently in an interview with one of the "Hedge Hunters" a group of super traders, there was a profile of T.Boon Pickins, one of the famous oil speculators of all time. The author of the book on these people stated that the key quality of T.Boone Pickins was that he was "SANGUINE" on the market at all time.
To be sanquine, is to be detached. Whether you use ZEN or whatever meditational technique, being sanquine is key. One must know one's position, but also know the position of everyone, and most importantly, the party who is in the opposite side of each trade. If you have a tremendous understanding of that person and the position, when the facts change, you can adjust in a heartbeat. If, on the other hand, one is emotionally invested in a position, one is destined to lose.
Thus the irony--when you are your brother's keeper....or at least have compassion....or maybe even knowledge of the opposite---one has the ability to be a great trader.
Recently in an interview with one of the "Hedge Hunters" a group of super traders, there was a profile of T.Boon Pickins, one of the famous oil speculators of all time. The author of the book on these people stated that the key quality of T.Boone Pickins was that he was "SANGUINE" on the market at all time.
To be sanquine, is to be detached. Whether you use ZEN or whatever meditational technique, being sanquine is key. One must know one's position, but also know the position of everyone, and most importantly, the party who is in the opposite side of each trade. If you have a tremendous understanding of that person and the position, when the facts change, you can adjust in a heartbeat. If, on the other hand, one is emotionally invested in a position, one is destined to lose.
Thus the irony--when you are your brother's keeper....or at least have compassion....or maybe even knowledge of the opposite---one has the ability to be a great trader.
"Just Like Jesse James"
In one of those old Cher crooning songs, she sings that she will shoot him down in flames, "Just like Jesse James." Yes. You would have to find an old Cher cassette to get that track, but I did have one for the trip to Northfield this weekend. And---it brought back memories of the fate of Jesse James----and why each year in Northfield, Mn., they celebrate "The Defeat of Jesse James Days" as the centerpiece of their historic heritage. Yes. They have the bricks. They have the historic homes. They celebrate the Defeat of Jesse James.
In the old days, the banks were not insured. You lose your savings and it is curtains for your family. Jesse James had made quite a name for himself as a bank robber. He was feared nationwide.
On that fateful morning as word spread that Jesse was robbing the bank, each man went and got his gun. They waded in and made a celebrated accounting of themselves. The Jesse James Gang was over.
Singlehanded, no one of them could have managed it. Together they got the job done.
We need to get back to the old days, when folks considered it THEIR money in the bank, and when folks did not just buy insurance and some complicated legal bundle of securitization, but rather felt a stake in their finanical institutions.
It seems we have just a whole lot of Jesse James look alikes these days. And it is true with concealed carry, folks could just protect their banks like in the old days.
In the old days, the banks were not insured. You lose your savings and it is curtains for your family. Jesse James had made quite a name for himself as a bank robber. He was feared nationwide.
On that fateful morning as word spread that Jesse was robbing the bank, each man went and got his gun. They waded in and made a celebrated accounting of themselves. The Jesse James Gang was over.
Singlehanded, no one of them could have managed it. Together they got the job done.
We need to get back to the old days, when folks considered it THEIR money in the bank, and when folks did not just buy insurance and some complicated legal bundle of securitization, but rather felt a stake in their finanical institutions.
It seems we have just a whole lot of Jesse James look alikes these days. And it is true with concealed carry, folks could just protect their banks like in the old days.
"The Great Bank Robbery of 2005"
The Great Robbery of 2005; Or, a modest proposal for the historical revision of the tales of armed robbery; OR, Book Review: “The best way to rob a bank is to own one.” By William K. Black.
Recently right in the midst of our local bank moving to its new location, a bold, young man strode in and robbed it in broad daylight. Because of the bank relocating, the cameras had been disabled and in the aftermath, the local rumor was that probably the robber would never be caught. Hopes faded for a solution to the crime.
As days passed, the rumor spread that this master of mischief had used such deceit as bandaids on his fingers to do the evil deed. He was rumored to change his clothes as fast as Superman and that he had a lot of tatoos on his back. The number of the tatoos seemed to grow as the days passed.
And then, just when the legend was starting to pick up speed, the robber was caught. By his own large mouth.
It seems that the robber, had spoken to another person while the FBI videotaped his discussion of robbing six banks in four states in seven months. In the process of these crimes, he netted $40,000. If convicted, he faces 20 years in prison for each robbery. Like 120 years in prison for $40,000.
I know what you are thinking----- that this guy just could not do the math. Robbers of earlier days in the 1930s were a lot smarter. Like Jesse James who the folks in Northfield, Minn still celebrate with Jesse James days. Those were the days! Those were the smartest of the smart! Wrong. Nothing has changed. The math was the same or worse in those days of yore. Who then ARE the “ GREATEST “of the bank robbers?…..Read on.
I am currently reading the book, “The Best Way to Rob a Bank is to Own One,” by William K. Black. Mr. Black was the lead regulator during the Savings and Loan Crisis of the 1980’s. In all, over 1000 individuals were convicted of felonies for what is called “control fraud.” This is essentially the white collar version of armed robbery. However, you might be interested to know that nobody counts it as robbery. Huh?
Mr. Black points out in his book that the lessons of the robbery of the S&L’s of the 1980’s has been lost on folks today, and today the same technique is being used to loot corporations. Mr. Black says ,” In 2003, the United States Department of Justice reported that property crimes had continued their trend and fallen to an all-time low. In fact, property crimes have surged to an all-time high since Enron collapsed in late 2001. The reason for the contradiction is that the Justice Department does not count serious crimes because it excludes white-collar crimes from its data keeping. A wave of frauds led by the men who control large corporations, what I term”control fraud,” caused the massive losses from property crimes.”(pp13)
So there you have it. All about the Great Robbery of 2005. Oh, by the way, it wasn’t the guy with the tatoos.
Recently right in the midst of our local bank moving to its new location, a bold, young man strode in and robbed it in broad daylight. Because of the bank relocating, the cameras had been disabled and in the aftermath, the local rumor was that probably the robber would never be caught. Hopes faded for a solution to the crime.
As days passed, the rumor spread that this master of mischief had used such deceit as bandaids on his fingers to do the evil deed. He was rumored to change his clothes as fast as Superman and that he had a lot of tatoos on his back. The number of the tatoos seemed to grow as the days passed.
And then, just when the legend was starting to pick up speed, the robber was caught. By his own large mouth.
It seems that the robber, had spoken to another person while the FBI videotaped his discussion of robbing six banks in four states in seven months. In the process of these crimes, he netted $40,000. If convicted, he faces 20 years in prison for each robbery. Like 120 years in prison for $40,000.
I know what you are thinking----- that this guy just could not do the math. Robbers of earlier days in the 1930s were a lot smarter. Like Jesse James who the folks in Northfield, Minn still celebrate with Jesse James days. Those were the days! Those were the smartest of the smart! Wrong. Nothing has changed. The math was the same or worse in those days of yore. Who then ARE the “ GREATEST “of the bank robbers?…..Read on.
I am currently reading the book, “The Best Way to Rob a Bank is to Own One,” by William K. Black. Mr. Black was the lead regulator during the Savings and Loan Crisis of the 1980’s. In all, over 1000 individuals were convicted of felonies for what is called “control fraud.” This is essentially the white collar version of armed robbery. However, you might be interested to know that nobody counts it as robbery. Huh?
Mr. Black points out in his book that the lessons of the robbery of the S&L’s of the 1980’s has been lost on folks today, and today the same technique is being used to loot corporations. Mr. Black says ,” In 2003, the United States Department of Justice reported that property crimes had continued their trend and fallen to an all-time low. In fact, property crimes have surged to an all-time high since Enron collapsed in late 2001. The reason for the contradiction is that the Justice Department does not count serious crimes because it excludes white-collar crimes from its data keeping. A wave of frauds led by the men who control large corporations, what I term”control fraud,” caused the massive losses from property crimes.”(pp13)
So there you have it. All about the Great Robbery of 2005. Oh, by the way, it wasn’t the guy with the tatoos.
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