Stockbrokers

Jul 6, 2007 6:06 pm

Are there any true stockbrokers that post on these boards? 

I'm curious because that's the vast majority of our group's business and it would be interesting to know if there is anyone here who doesn't just do funds or insurance.  I know it might be a little outdated, but it is our niche and has worked very well, and true stock pickers know they are worth their weight in gold.

Jul 6, 2007 6:25 pm

Usta be a radical - usta be a stock picker. Found it was not cost effective from a time point of view. So I’m not helping answer your question, just make sure you are really adding value and it is worth your time, since it is a long term strategic investment, in terms of positioning with your clients and their friends.

Jul 6, 2007 6:44 pm

About 85% of my business is stock and bond business. 99% of those accounts are commission based. Consequently my velocity on assets is awful, but clients are happy

Jul 6, 2007 6:50 pm

Trust me, it is very cost effective.  For every $10MM in assets we gross about $500,000/year.  We have 40 years of experience, our goal is 20-40% or better returns in a 6-12-18 month time period.  I leverage my partner’s success in the U.S. Stock Championships that were featured in Investor’s Business Daily and Barron’s where he placed as high as 3rd in the nation.  The positioning is great because no one else does it and we’ve developed our own proprietary strategies.  We are currently expanding our services to capture more “mainstream” conservative investments.  

Jul 6, 2007 7:09 pm

Stocks are the American Dream.

As sooned as "everyone" transitions to fee-based, the stockpicking broker will be in high demand.

In my opinion.

Without individual stocks, this job would be boring to me.

Jul 6, 2007 9:04 pm

[quote=FreeLunch]

Without individual stocks, this job would be boring to me.

[/quote]

Agreed.  Currently makes up about 30% of my business, but was 90% for the first few years in the business.  The problem I had was I wasn’t building a business.  I was making good money for clients and myself on a relatively smaller amount of assets, but prospecting efforts took a back seat to analyzing stocks.  Now I do mostly managed money, funds,etfs, then stocks. The knowledge that comes from trading stocks or running your own portfolio goes a long way when sitting across from a client, especially in a competitive situation when the majority of guys now only sell off the glossy literature and quote some investing 101 course. 
Jul 6, 2007 9:06 pm

ive been doing more individual bond and preferred stock business lately. it's hard to be a "true stockbroker" in a bank.

when i started at a wirehouse i built a book on individual stocks, unfortunetly the stocks i picked went down

Jul 6, 2007 9:26 pm

[quote=wallstreeter]Trust me, it is very cost effective.  For every $10MM in assets we gross about $500,000/year.  We have 40 years of experience, our goal is 20-40% or better returns in a 6-12-18 month time period.  I leverage my partner's success in the U.S. Stock Championships that were featured in Investor's Business Daily and Barron's where he placed as high as 3rd in the nation.  The positioning is great because no one else does it and we've developed our own proprietary strategies.  We are currently expanding our services to capture more "mainstream" conservative investments.   [/quote]

This is pretty hard to believe. No way you are pulling 5% off principle, in up and down markets, unless you have a steady stream of suckers. If this is a 40 year phenomenon, it would have been mentioned in my CFP study materials. Sorry.

Jul 6, 2007 9:41 pm

[quote=GolFA]

[quote=wallstreeter]Trust me, it is very cost effective.  For every $10MM in assets we gross about $500,000/year.  We have 40 years of experience, our goal is 20-40% or better returns in a 6-12-18 month time period.  I leverage my partner's success in the U.S. Stock Championships that were featured in Investor's Business Daily and Barron's where he placed as high as 3rd in the nation.  The positioning is great because no one else does it and we've developed our own proprietary strategies.  We are currently expanding our services to capture more "mainstream" conservative investments.   [/quote]

This is pretty hard to believe. No way you are pulling 5% off principle, in up and down markets, unless you have a steady stream of suckers. If this is a 40 year phenomenon, it would have been mentioned in my CFP study materials. Sorry.

[/quote]

2.5% on the buy, 2.5% on the sell.  Most stocks usually turn over between 6-12 months, some sooner, some later.  For instance, yesterday we sold BPHX.  Originally purchased on 5/30/2007 at 9.688, sold at 13.00.  So we held it for a month and a week, made 34% on it.  Only a handful of clients were in that position, so that money turned over.  When really big positions move we will have 50,000 to 75,000 shares and do a block order.  We then reinvest and so forth.  Not all the stocks are winners, but 85% of them are.  5% on the principal is an average, but over the years that's what it equates to.  We find emerging growth stocks and turnaround situations.  We don't invest in blue chips.  We find stocks before 99% of people do and we may buy 6 months or 1 year early, but when they move, it happens quick.  If you are having a tough time understanding or believing this, just think about what it was like before the regulatory bodies cut the commissions in half, from 5%/buy and sell to 2.5%.  Hence, our production was cut in half.  Most of our clients have been with us for years.  And yes, a bad market can hurt, but when we scan for stocks, we try to find the ones about to break out, and in every market, good or bad, there will always be some stocks doing well.

Jul 6, 2007 9:53 pm

[quote=GolFA]

This is pretty hard to believe. No way you are pulling
5% off principle, in up and down markets, unless you have a steady
stream of suckers. If this is a 40 year phenomenon, it would have been
mentioned in my CFP study materials. Sorry.

[/quote]



It’s called churning, and it was mentioned.
Jul 6, 2007 10:00 pm

Let's say you have an intelligent prospect that comes in with $500,000.

I'll tell you what I like to do:

With $400,000 build a well-balanced mutual fund portfolio.

With the other $100,000 - have $80,000 worth of "core" solid companies (about 4 - $20k a piece), and leave about $20,000 to do some more aggressive trades.

It keeps you in touch with them.  It helps people have something to "pull for"

If you own $20,000 worth of Apple, GO APPLE!

Jul 6, 2007 10:00 pm

[quote=AllREIT] [quote=GolFA]

This is pretty hard to believe. No way you are pulling 5% off principle, in up and down markets, unless you have a steady stream of suckers. If this is a 40 year phenomenon, it would have been mentioned in my CFP study materials. Sorry.

[/quote]

It's called churning, and it was mentioned.
[/quote]

Let me put it this way: Our policy with our clients is that if we trade a position and they did not gross 20% profit, we take our commission out.  We don't make money unless they make money.  This is what makes us unique.  Everyone out there is getting their CFP, but we are literally offering something they can't get from the majority of financial professionals out there. 

Jul 6, 2007 10:01 pm

I get what you are doing, and I'm sure your suitability specs are in line with client's net worth, goals, risk tolerance. Managed funds, which are passive from advisor's and client's POV, strive to do the same - and if there is a premium to the risk, who cares about fees.

What really interests me, though, is the potential for a perfect storm, in terms of the principal, do you sell everything off in a down market verus a buy and hold strategy - there are times, like around 2000 and then through 9/11, when the whole market is down, I guess you could focus on sectors and individual research - but your risk of losing prinicipal or not getting paid goes way, way up.

Buffet extracts high returns because his holding period is forever. You get paid no matter what, your clients must understand what you are doing and have the portfolios to handle income and such from other pockets.

Jul 6, 2007 10:01 pm

Wallstreeter - What is your policy on Short-Selling?

What Percent of your book is short positions?

Jul 6, 2007 10:03 pm

[quote=wallstreeter][quote=AllREIT] [quote=GolFA]

This is pretty hard to believe. No way you are pulling 5% off principle, in up and down markets, unless you have a steady stream of suckers. If this is a 40 year phenomenon, it would have been mentioned in my CFP study materials. Sorry.

[/quote]

It's called churning, and it was mentioned.
[/quote]

Let me put it this way: Our policy with our clients is that if we trade a position and they did not gross 20% profit, we take our commission out.  We don't make money unless they make money.  This is what makes us unique.  Everyone out there is getting their CFP, but we are literally offering something they can't get from the majority of financial professionals out there. 

[/quote]

This post in while I was writing. I don't mean the CFP means anything special, so let's focus on you not getting paid if your client does not get 20% gross profit. You ran this business through the last downturn?

Jul 6, 2007 10:06 pm

GOLFA

HE'S GOT TO BE ABLE TO SHORT.  THAT IS HIS ONLY HOPE.

If they're averaging 20-40%, I'm surprised they haven't got some serious backing to start a Hedge Fund.

I mean really.  That's where the big bucks are.

Jul 6, 2007 10:09 pm

You got it, FreeLunch. He’s swimming in a more dangerous lake, but somebody’s gotta do it.

Jul 6, 2007 10:19 pm

[quote=GolFA]

I get what you are doing, and I'm sure your suitability specs are in line with client's net worth, goals, risk tolerance. Managed funds, which are passive from advisor's and client's POV, strive to do the same - and if there is a premium to the risk, who cares about fees.

What really interests me, though, is the potential for a perfect storm, in terms of the principal, do you sell everything off in a down market verus a buy and hold strategy - there are times, like around 2000 and then through 9/11, when the whole market is down, I guess you could focus on sectors and individual research - but your risk of losing prinicipal or not getting paid goes way, way up.

Buffet extracts high returns because his holding period is forever. You get paid no matter what, your clients must understand what you are doing and have the portfolios to handle income and such from other pockets.

[/quote]

Great question.

Of course there could be a perfect storm, but we've been doing this for 40 years.  Actually, we will never sell everything off.  We've developed about 5 different techniques.  All of these techniques are derived from decades of research from looking at 1000's of charts/night.  One of these is what we call the Base Range Strategy.  These stocks had huge highs and have come down significantly.  Once they meet our criteria, we buy.  A lot of the downside has already been taken out.  Once it starts to turn up, you know something is up with the company.  Remember, fundamentals look backwards, technicals show you what's coming.  In bad markets, these Base Range stocks hold their own very well.  Say we like a stock and it has a good range from 6-9, we may buy at 6 or at 9, you really just can't tell sometimes.  So over a year it could trade anywhere in that range, then all of a sudden the stock breaks out and we sell. 

Take a look at the ticker FORD.  We found this company was starting to break out of its base in 2004.  We do some research, see that they made the leather carrying cases for Motorola cell phones, see that they are landing a contract to make cases for Ipod's and we buy at the mid-3's to mid-4's. A year later we take our gains in the 21-22 range and take the 500+% profit.  This was a grand slam to say the least but that's some of what we look for.

Jul 6, 2007 10:23 pm

[quote=FreeLunch]

Wallstreeter - What is your policy on Short-Selling?

What Percent of your book is short positions?

[/quote]

We do short, but only for clients with over $1MM.  Also, we only short if they are 100% covered.  We don't do it much and actually we aren't short anything right now.  We feel the market will go up to 18,000, any bumps along the way are just that, small bumps and the stocks will weather the storm.  Our clients are very well diversified within their portfolios as well. 

Jul 6, 2007 10:25 pm

[quote=FreeLunch]

GOLFA

HE'S GOT TO BE ABLE TO SHORT.  THAT IS HIS ONLY HOPE.

If they're averaging 20-40%, I'm surprised they haven't got some serious backing to start a Hedge Fund.

I mean really.  That's where the big bucks are.

[/quote]

As far as the hedge fund is concerned, it's been brought up.  I would consider it, but I'm half of this operation (lucky sperm club), and we are happy where we're at. 

Jul 6, 2007 10:25 pm

wallstreeter,

You did not explain your strategy in a Bear Market very well

Especially since you said you don't get paid unless you have a 20% profit.

Technical indicators work very well, and 90% of the time it can be a self-fullfilling prophecy.

However, when a companies P/E decides to shrink from 30 to 20, there is not a chart strategy thats going to save you from the inevitable.

I'll ask again - DO YOU SHORT.

Jul 6, 2007 10:30 pm

[quote=FreeLunch]

wallstreeter,

You did not explain your strategy in a Bear Market very well

Especially since you said you don't get paid unless you have a 20% profit.

Technical indicators work very well, and 90% of the time it can be a self-fullfilling prophecy.

However, when a companies P/E decides to shrink from 30 to 20, there is not a chart strategy thats going to save you from the inevitable.

I'll ask again - DO YOU SHORT.

[/quote]

The first thing I learned in this business was that P/E ratios mean sh*t.  Literally, that's what I heard, I don't even look at them.

And, yes, I already answered, we do short.  Just not short anything right now.  And in a true bear market we don't short THAT MUCH.  We have to be prepared to weather the storm.  Trust me, there have been at least a couple bad years, but the good ones more than make up for it.

Jul 6, 2007 10:52 pm

Kind of exciting to hear from a real stock jock. Most of us here are in the financial education business, of sorts. My biz to is try to diversify risk to the point of boredom, where blended index returns at reasonable cost rule the day.

Of course, when someone comes to me with $350,000 to invest and nearer term portfolio withdrawal goals, I'm thinking preservation.

In fact, in order to generate some excitement around here, I'm thinking to hire someone to go gather more assets that we can be boring about.

With the money money I manage and your returns, I could become a massive target for the IRS and double my lifestyle. I guess there are different kinds of intelligence, my may have more to do with making folks feel good or using a loft wedge to feel my way to the green from fifty yards.

What you are doing is cool and inspiring.

Jul 6, 2007 10:59 pm

[quote=wallstreeter][quote=AllREIT] [quote=GolFA]

This is pretty hard to believe. No way you are pulling 5% off principle, in up and down markets, unless you have a steady stream of suckers. If this is a 40 year phenomenon, it would have been mentioned in my CFP study materials. Sorry.

[/quote]

It's called churning, and it was mentioned.
[/quote]

Let me put it this way: Our policy with our clients is that if we trade a position and they did not gross 20% profit, we take our commission out.  We don't make money unless they make money.  This is what makes us unique.  Everyone out there is getting their CFP, but we are literally offering something they can't get from the majority of financial professionals out there. 

[/quote]

Dude, that's illegal.

Jul 6, 2007 11:02 pm

[quote=GolFA]

Kind of exciting to hear from a real stock jock. Most of us here are in the financial education business, of sorts. My biz to is try to diversify risk to the point of boredom, where blended index returns at reasonable cost rule the day.

Of course, when someone comes to me with $350,000 to invest and nearer term portfolio withdrawal goals, I'm thinking preservation.

In fact, in order to generate some excitement around here, I'm thinking to hire someone to go gather more assets that we can be boring about.

With the money money I manage and your returns, I could become a massive target for the IRS and double my lifestyle. I guess there are different kinds of intelligence, my may have more to do with making folks feel good or using a loft wedge to feel my way to the green from fifty yards.

What you are doing is cool and inspiring.

[/quote]

Oddly enough we are shifting the business to capture more assets.  Where before our book was 99% stocks, we are trying to gather outside assets in more of a wealth preservation way so that stocks make up 70% of the business.  With the 30% in funds, UITs, etc, with our 83%, the annuitized business would be quick and easy. 

We just have to find the right clients - we don't do insurance at all, if I knew Bobby, i'd probably refer it to him.

The best part about it is that it's a lost art and the right kind of people appreciate it for what it is.  Others who don't understand it, don't believe it, or what have you will just badmouth it.   

Jul 6, 2007 11:05 pm

[quote=wallstreeter][quote=GolFA]

Kind of exciting to hear from a real stock jock. Most of us here are in the financial education business, of sorts. My biz to is try to diversify risk to the point of boredom, where blended index returns at reasonable cost rule the day.

Of course, when someone comes to me with $350,000 to invest and nearer term portfolio withdrawal goals, I'm thinking preservation.

In fact, in order to generate some excitement around here, I'm thinking to hire someone to go gather more assets that we can be boring about.

With the money money I manage and your returns, I could become a massive target for the IRS and double my lifestyle. I guess there are different kinds of intelligence, my may have more to do with making folks feel good or using a loft wedge to feel my way to the green from fifty yards.

What you are doing is cool and inspiring.

[/quote]

Oddly enough we are shifting the business to capture more assets.  Where before our book was 99% stocks, we are trying to gather outside assets in more of a wealth preservation way so that stocks make up 70% of the business.  With the 30% in funds, UITs, etc, with our 83%, the annuitized business would be quick and easy. 

We just have to find the right clients - we don't do insurance at all, if I knew Bobby, i'd probably refer it to him.

The best part about it is that it's a lost art and the right kind of people appreciate it for what it is.  Others who don't understand it, don't believe it, or what have you will just badmouth it.   

[/quote]

Soooooo.......you're gonna take something that's averaged 30%/year and do LESS of it?

Jul 6, 2007 11:09 pm

[quote=Bobby Hull][quote=wallstreeter][quote=GolFA]

Kind of exciting to hear from a real stock jock. Most of us here are in the financial education business, of sorts. My biz to is try to diversify risk to the point of boredom, where blended index returns at reasonable cost rule the day.

Of course, when someone comes to me with $350,000 to invest and nearer term portfolio withdrawal goals, I'm thinking preservation.

In fact, in order to generate some excitement around here, I'm thinking to hire someone to go gather more assets that we can be boring about.

With the money money I manage and your returns, I could become a massive target for the IRS and double my lifestyle. I guess there are different kinds of intelligence, my may have more to do with making folks feel good or using a loft wedge to feel my way to the green from fifty yards.

What you are doing is cool and inspiring.

[/quote]

Oddly enough we are shifting the business to capture more assets.  Where before our book was 99% stocks, we are trying to gather outside assets in more of a wealth preservation way so that stocks make up 70% of the business.  With the 30% in funds, UITs, etc, with our 83%, the annuitized business would be quick and easy. 

We just have to find the right clients - we don't do insurance at all, if I knew Bobby, i'd probably refer it to him.

The best part about it is that it's a lost art and the right kind of people appreciate it for what it is.  Others who don't understand it, don't believe it, or what have you will just badmouth it.   

[/quote]

Soooooo.......you're gonna take something that's averaged 30%/year and do LESS of it?

[/quote]

Yes, because some of our clients have assets at other firms and now we are bringing that in.  We would like to have some annuitized business, there are many reasons to do it that you can't possibly understand.

Jul 6, 2007 11:27 pm

wallstreeter, why don't you guys start a hedge fund? seems like you have the right clients. and if you guys really deliver those returns, you would make more $$$$

Jul 6, 2007 11:39 pm

Well, that's a good point. There is always a "marketing mix" in servicing clients - sweet spots that balance everything for you and the client.

For example, how stressful is your business, without a fee based core that might be a little more boring and diversified.

As far as the lost art, yes, I think you are right. Old school was to just keep a portfolio of securities - and the " planners " who used funds were not real advisors.

Plus, your brain just gets soft or maybe your " luck " runs cold after a while, or maybe you want to move onto other things a little - in my case, I have started cold calling other advisors and just asking who wants to move over here. If I make the one or two "sales" - the right sale, my AUM, my AUM, and income, will double in three or more years.

That's why guys shouldn't get in a pissin contest about who does it best - so many great ways to dice a succulent pineapple.

I tried to bring in more stock sizzle to my portfolios a couple of years ago - your'e right, one in 5 was a rocket ship, just using the S&P platinum or whatever list it was we bought - but I sleep better now being Mister Milqutoast and focusing on golf related advising. ( Clients who like golf get more personal attention.) 

Jul 6, 2007 11:55 pm

[quote=wallstreeter]

The first thing I learned in this business was that P/E ratios mean sh*t.  Literally, that's what I heard, I don't even look at them.

And, yes, I already answered, we do short.  Just not short anything right now.  And in a true bear market we don't short THAT MUCH.  We have to be prepared to weather the storm.  Trust me, there have been at least a couple bad years, but the good ones more than make up for it.

[/quote]

If you don't look at P/Es - then you are not a stock trader, you are a CHART TRADER.  If you don't look at P/Es, you are disregarding the most important variable in the equation.

IN CASE YOU HAVEN'T THOUGHT ABOUT THIS, 99% OF A STOCKS DAILY/WEEKLY/MONTHLY MOVE IS A CHANGE IN P/E

The P/E, more importantly Forward P/E is the most important variable along with EPS in the equation.

IF YOU DON'T LOOK AT P/E AND FORWARD P/E YOU ARE MAKING A HUGE MISTAKE.    Your skills inevitably come down to reading charts, and do not involve insight.

Jul 7, 2007 12:07 am

Take Apple for example.

They reported April 25th - stock ended up around $100 per share.

the stocks at $130.

Hmmm....Earnings haven't changed.  What has?

Price = EPS X (?)

The Forward P/E has gone up proportionately.

You trade the chart, all the time.  And I'm here to tell you point blank that what moves the stock, for the most part is a mix between supply and demand and their future profit potential.

Why do you think that earning forecasts play such a huge role

GROWTH GROWTH GROWTH

Jul 7, 2007 2:57 am

very interesting thread. 

Wallstreeter, I have to agree with some of the other posters.  If you're rockin' it that hard, start a hedge fund.  If you have that long of a track record, it should be an easier sale than some, and you've already got a substantial client base for seed money.

I guess at that point, wouldn't one of the big questions be whether to hire on some other hotshot specialists to diversify the holdings and strategies into, say, art and real estate and currency bets, etc..., or just stick with what's been working? 

I just did a google for "highest paid hedge fund manager", and clicked on the first article.  I read the whole thing, and thought it got a little preachy.  Then I realized that it's hosted on a website called "World Socialist Website".  No wonder.

http://www.wsws.org/articles/2005/jun2005/hedg-j09.shtml

Here's a link from April of the top 10 highest paid hedge fund managers.  Can you imagine pulling down $2B in 1 year?  Do these guys literally eat, sleep, and shave in front of a terminal?  Do they have time to spend the mountain of money they make each hour?  Anyone know if there's a "typical day in the life of" a (really successful) hedge fund manager? 

http://paul.kedrosky.com/archives/2007/04/11/top_ten_highest .html

Jul 7, 2007 3:07 am

Remember Gordon Gekko?

I'm talking liquid. Enough money to have your own jet. Enough money not to waste time. Fifty, one hundred million dollars. A player.

Jul 7, 2007 6:41 am

[quote=Big Taco]

very interesting thread. 

Wallstreeter, I have to agree with some of the other posters.  If you're rockin' it that hard, start a hedge fund.  If you have that long of a track record, it should be an easier sale than some, and you've already got a substantial client base for seed money.

I guess at that point, wouldn't one of the big questions be whether to hire on some other hotshot specialists to diversify the holdings and strategies into, say, art and real estate and currency bets, etc..., or just stick with what's been working? 

I just did a google for "highest paid hedge fund manager", and clicked on the first article.  I read the whole thing, and thought it got a little preachy.  Then I realized that it's hosted on a website called "World Socialist Website".  No wonder.

http://www.wsws.org/articles/2005/jun2005/hedg-j09.shtml

Here's a link from April of the top 10 highest paid hedge fund managers.  Can you imagine pulling down $2B in 1 year?  Do these guys literally eat, sleep, and shave in front of a terminal?  Do they have time to spend the mountain of money they make each hour?  Anyone know if there's a "typical day in the life of" a (really successful) hedge fund manager? 

http://paul.kedrosky.com/archives/2007/04/11/top_ten_highest .html

[/quote]

I'll be the first to admit we don't have the assets, clientele, nor connections to justify a hedge fund.  We are just boutique stockbrokers that do well for our clients.  Our book isn't huge, there hasn't been any prospecting in 7 years, but that has now changed and we are actively looking for new clients.  We have thought about possibly starting an online stock picker subscription service based on our strategies, but the legality of it probably would require one of us to not be licensed and not be a broker.  If we could get 10,000 customers of that at $500/year, that would be $5,000,000/year with very little overhead.  When the regulator's cut the commissions, 12b-1 fees, and whatever else they want to do, that's when we would just find a way to do that.

Jul 7, 2007 4:58 pm

I am jumping into this discussion late, but…



Wallstreeter said: “Not all the stocks are winners, but 85% of them are.” when

describing his portfolio management. This is where he loses all credibility

with me. No one, and I mean no one, picks stock that are winners 85% of

the time. If they did, they sure as hell wouldn’t be wasting time posting on

an internet message board. They would be on a beach…retired.



The most successful money managers in the world only get it right 55-60%

of the time.



The fact that Wallstreeter claims 85% accuracy, with 5% ROA…this guy is

full of crap.

Jul 7, 2007 5:08 pm

I just read this entire thread…let me tell you guys something -

Wallstreeter is feeding you guys a bunch of crap.



No one picks winners 80% of the time.

No one averages 30-40% per year for 40 years and DOESN’T HAVE

ENOUGH ASSETS TO START A HEDGE FUND?!?!?!?



And then he goes on to say "let me put it this way: Our policy with our

clients is that if we trade a position and they did not gross 20% profit, we

take our commission out. We don’t make money unless they make

money. This is what makes us unique."



The reason this is so unique…is because it is illegal!! No compliance

would go for this. No idiot would post it on a forum if he was doing it.



I am all for stock pickers. I think it is a lost art and I am one. I do all

discretionary portfolio management. I have a very good track record, but

do not come close to picking 85% winners. There is no way you can have

85% success rate an only hold stocks for a few months at a time.



This guy makes me laugh - and to think that some of you are buying

it…sheeeesh. Come on guys.

Jul 7, 2007 6:15 pm

Maverick is right.  I was lying about everything.  Just thought it would be an interesting thread on a boring day.  Back to selling insurance.

Jul 7, 2007 8:28 pm

Wallstreeter

I believe you. I see people who use Zacks research and have that type of ROA and beat the market. I use syndicate deals to generate a high ROA on a certain amount of client assets. I first set the accounts up in mutual funds, UIT's or some type of managed account. Secondly, I will take a portion of the account and trade syndicate deals. I was the syndicate cordinater at MS for about 15 years and am familiar with how deals work. I also would get cold called by "hedge funds" (IPO and Secondary DVP whores) who try to buy any deal and sell it in a few days or at least short term. I do the same strategy. You need to have the nerve to buy 20k or 30k in a stock and trade it for 10%. I have done this for years and still do it at my new firm. I will also be someones best client when I retire from this business because I will do the same and it works. Everyone wants the hot deals and that was great in 1999 and 2000 but now a hot deal is 100-200 shares that goes up 5 points. We just did ESEA one week ago at 13.50 (a secondary) and sold it last week 14.50-14.75 with a 10 cent markdown. If they do not work in a few months and we are down, i will sell them without a commision. Other notes are selling an IPO on the day the underwriters put the stock on the buys list. this occurs about one month after the deal.

Remember that there are many different ways to make money

Jul 7, 2007 10:55 pm

This guy makes me laugh - and to think that some of you are buying
it...sheeeesh. Come on guys.

My approach is to always try and draw people out, and learn what I can. He dramatizes some good points - like when he said they pull 5% off of 10 million, maybe that is the part of the portfolio they invest aggressively, maybe they have cash, bond ladders, buy and hold stocks somewhere else they aren't so exciting.

The threads here are often pissing contests, and then you have the guys who love to give " tough love " and call out the bullsh*t.

We've all been around long enough to know that some of the dramatic stuff here does not hold water in a sustained and steady fashion. But elements are true, and it's fun to dream.

Jul 7, 2007 11:06 pm

[quote=Big Taco]

Remember Gordon Gekko?

I'm talking liquid. Enough money to have your own jet. Enough money not to waste time. Fifty, one hundred million dollars. A player.

[/quote]

Gekko is coming back. Sequel being filmed or has already been filmed. Name of movie, "Money Never Sleeps".

Jul 7, 2007 11:43 pm

GolFA, I didn’t say that I buy the story, or any extraordinary story from anyone posting on any internet board.  But it’s still a good, interesting story.  Got me thinking about those filthy rich hedge fund managers, and annual incomes that I can’t even begin to fathom.

Jul 8, 2007 12:26 am

wallstreeter,

What kind of tecnical analysis do you use?   P & F?

Jul 8, 2007 12:54 am

Sorry, Taco, don't think it was clear from my post that I was quoting and responding about Maverick's post - apparently he did think we took the story literally.

The whole thing got me thinking about how I could get a better return on my AUM, and I'm seriously investigating taking on an Associate Financial Advisor, partly inspired by the spirit of the thread.

The nuggets we uncover from these forums can be surprises, I guess.

Jul 8, 2007 1:20 am

I use three platforms to manage clients money. One of them, is me picking stocks on a discretionary basis. I am a big believer in leveraging time, and not being an analyst. So what I am basically doing is running two portfolios, using my wirehouse's research. I dont just follow the model, but I use it to glean ideas, and buy what i think are the best ones. This year, to date, I am ahead of the S&P by 3.48%, net of fees, not including divi's reinvested (in the s&P return). So I'm thrilled. I would never pick stocks for clients on a non discretionary platform. They want to make final decisions, and when that happens, they end up buying too much, holding on too long, never wanting to admit they are wrong. With discretion, its easier to admit my mistakes quickly and move on. And I do block trades for the portfolio, with our technology, so no need to drop 50 tickets to get out of a position. I sit with cash for sometimes extended periods, so I think I am getting good returns wtih less risk than the index. I very rarely go more than 5% in a position, I pay attention to sector weightings, I use ETF;s when appropriate, and I dont generally own more than 20-25 stocks at any point.

Last year I beat the S&P by 1.5%, the year before I think it beat me by 2%. But clients like the idea that I am personally managing the money, and they can discuss it with me anytime they want to. I get 1.5% (just recently reduced my fee from 2, just becasue it makes more sense - when I set these accounts up, most of them at least, 2% was competitive, now its not.). I always tell clients, the indices, are just a frame of reference, if I can get you 7% average for 10years, I double your money. It works for most of the people I take on.

So, I think there is room for being a stockpicker (which is why a lot of us got into the business in the first place), in a fee based, managed money world. 

Just my 2 cents

Jul 8, 2007 1:22 am

[quote=aldo63]

Wallstreeter

I believe you. I see people who use Zacks research and have that type of ROA and beat the market. I use syndicate deals to generate a high ROA on a certain amount of client assets. I first set the accounts up in mutual funds, UIT's or some type of managed account. Secondly, I will take a portion of the account and trade syndicate deals. I was the syndicate cordinater at MS for about 15 years and am familiar with how deals work. I also would get cold called by "hedge funds" (IPO and Secondary DVP whores) who try to buy any deal and sell it in a few days or at least short term. I do the same strategy. You need to have the nerve to buy 20k or 30k in a stock and trade it for 10%. I have done this for years and still do it at my new firm. I will also be someones best client when I retire from this business because I will do the same and it works. Everyone wants the hot deals and that was great in 1999 and 2000 but now a hot deal is 100-200 shares that goes up 5 points. We just did ESEA one week ago at 13.50 (a secondary) and sold it last week 14.50-14.75 with a 10 cent markdown. If they do not work in a few months and we are down, i will sell them without a commision. Other notes are selling an IPO on the day the underwriters put the stock on the buys list. this occurs about one month after the deal.

Remember that there are many different ways to make money

[/quote]

Alpo, if you believe him then you are a retard.

Jul 8, 2007 4:17 am

bobby ho

it's aldo and maybe you have one to many pucks to your head.

of course there is only one way to make money. diversify into mutual funds until you are the index or buy the best performing funds before you owned them... another ??? popular stragegy.  Companies push this only because the do not want to get sued. not an issue in 20 years.. believe in yourself...

of course there can be no other way to do it beside that??????????????????????????????????????????????????.

Jul 9, 2007 4:13 am

LOL

Jul 9, 2007 4:54 pm

Maverick said: "No one picks winners 80% of the time.
No one averages 30-40% per year for 40 years and DOESN'T HAVE
ENOUGH ASSETS TO START A HEDGE FUND?!?!?!?

And then he goes on to say "let me put it this way: Our policy with our
clients is that if we trade a position and they did not gross 20% profit, we
take our commission out. We don't make money unless they make
money. This is what makes us unique."

The reason this is so unique....is because it is illegal!! No compliance
would go for this. No idiot would post it on a forum if he was doing it."

Whomit says:

Well I agree that an "80%" success rate is a red flag, but mostly because it is a round number that seems to be from the Ron Reagan school of Statistics (where their motto is "74.975% of statistics are made up on the spot anyway"). If he had said 82.5% of 76.3% his story would have been harder to disbelieve. 80% sounds too approximate, as in "Yeah, some go down too. But not many!"

Meanwhile I do have a pretty good track record of buying stocks that show a 20% return in less than 1 year. Unfortunately, I also have a track record of stocks that have gone down by 20% in short order too. Before anybody tells me how to trade, stuff it!

As to the commish statement. If I need to (which is to say that I most generally do not) I opt for a strategy wherein I give the client a 50% discount on buying a security and then discount the sell side as a function of the ROR. If the client comes out with a net 20% profit, I charge the full 100% commish.  For every percentage point below 20% that the client has on the sell I discount the commish by 2.5% down to a 50% discount. Thus if the client is at break even or below they have paid the equivalent of one way for the trade.

This show the client that I am really on their side here and trying to get them an above average Rate Of Return. It also sets the expectation at the time of purchase.

Point is, there are ways of discounting the trade that will not fly in the face of compliance. (It helps that I am Indy and as such, don't have to deal with the firm discounting my payouts based on the discounts that I give the clients, not directly anyway.) 

Jul 9, 2007 5:03 pm

[quote=Whomitmayconcer]

Maverick said: "No one picks winners 80% of the time.
No one averages 30-40% per year for 40 years and DOESN'T HAVE
ENOUGH ASSETS TO START A HEDGE FUND?!?!?!?

And then he goes on to say "let me put it this way: Our policy with our
clients is that if we trade a position and they did not gross 20% profit, we
take our commission out. We don't make money unless they make
money. This is what makes us unique."

The reason this is so unique....is because it is illegal!! No compliance
would go for this. No idiot would post it on a forum if he was doing it."

Whomit says:

Well I agree that an "80%" success rate is a red flag, but mostly because it is a round number that seems to be from the Ron Reagan school of Statistics (where their motto is "74.975% of statistics are made up on the spot anyway"). If he had said 82.5% of 76.3% his story would have been harder to disbelieve. 80% sounds too approximate, as in "Yeah, some go down too. But not many!"

Meanwhile I do have a pretty good track record of buying stocks that show a 20% return in less than 1 year. Unfortunately, I also have a track record of stocks that have gone down by 20% in short order too. Before anybody tells me how to trade, stuff it!

As to the commish statement. If I need to (which is to say that I most generally do not) I opt for a strategy wherein I give the client a 50% discount on buying a security and then discount the sell side as a function of the ROR. If the client comes out with a net 20% profit, I charge the full 100% commish.  For every percentage point below 20% that the client has on the sell I discount the commish by 2.5% down to a 50% discount. Thus if the client is at break even or below they have paid the equivalent of one way for the trade.

This show the client that I am really on their side here and trying to get them an above average Rate Of Return. It also sets the expectation at the time of purchase.

Point is, there are ways of discounting the trade that will not fly in the face of compliance. (It helps that I am Indy and as such, don't have to deal with the firm discounting my payouts based on the discounts that I give the clients, not directly anyway.) 

[/quote]

Whom - Thank you for making sense of the discounting commissions issue to some of the people here.  Independence does have it's advantages, especially for stock traders.  Plus we just went through an extensive NASD audit...everything is legit.

Jul 9, 2007 5:07 pm

GolFA said: "Buffet extracts high returns because his holding period is forever. You get paid no matter what, your clients must understand what you are doing and have the portfolios to handle income and such from other pockets. "

Whomit says: You disunderstand the Buffet formula. Buffet buys companies and extracts the earnings from them so that he can buy other companies! Buffet has what other companies need in times of trouble, CASH. Then he gets to dictate the terms of the deal to the borrower, 'Give me a 9% convertible preferred at the money and I'll buy it, otherwise, go bust and I'll buy the pieces of your company I want from the bankruptsie administrator!'

Jul 9, 2007 5:22 pm

Well the other thing that Maverick out to re read is the always deceptive "40 years of experience" and understand that that means that there is one guy with 25 years and 2 guys with 6 each and one guy with 3.

I'm not taking issue with it. I'm just surprised that someone still falls for that line (could be my background in the advertising industry that makes me sensitive to these sorts of phrases).

Jul 9, 2007 5:30 pm

[quote=Whomitmayconcer]

GolFA said: "Buffet extracts high returns because his holding period is forever. You get paid no matter what, your clients must understand what you are doing and have the portfolios to handle income and such from other pockets. "

Whomit says: You disunderstand the Buffet formula. Buffet buys companies and extracts the earnings from them so that he can buy other companies! Buffet has what other companies need in times of trouble, CASH. Then he gets to dictate the terms of the deal to the borrower, 'Give me a 9% convertible preferred at the money and I'll buy it, otherwise, go bust and I'll buy the pieces of your company I want from the bankruptsie administrator!'

[/quote]

Something tells me that's not how he aquired the furniture mart from the old Jewish lady in Omaha.

Jul 9, 2007 6:30 pm

The question is "Why did he aquire the Furniture mart?"

The answer is "Because it throws off oodles of cash which can then be reinvested." Which is what I said.

When you buy shares of a company, you might get dividends. When you buy the company you get to decide what to do with the cash flow!

Not to say that buying dividend paying stocks and using the dividends to build a portfolio is a bad idea. It's just hard to do on such of a small scale ($1 million or less) meaningfully.

Jul 9, 2007 6:37 pm

[quote=Whomitmayconcer]

Well the other thing that Maverick out to re read is the always deceptive "40 years of experience" and understand that that means that there is one guy with 25 years and 2 guys with 6 each and one guy with 3.

I'm not taking issue with it. I'm just surprised that someone still falls for that line (could be my background in the advertising industry that makes me sensitive to these sorts of phrases).

[/quote]

Yeah, but it's true.  There's always a way to spin something.  Bottom line is that one of us has the gray hair, started with Dean Witter in late 60's, went through the Michael Milken Fruit of the Loom days, watched Painewebber have their issues and so on...Makes for some great conversation though.

Jul 9, 2007 6:46 pm

[quote=Whomitmayconcer]

The question is "Why did he aquire the Furniture mart?"

The answer is "Because it throws off oodles of cash which can then be reinvested." Which is what I said.

When you buy shares of a company, you might get dividends. When you buy the company you get to decide what to do with the cash flow!

Not to say that buying dividend paying stocks and using the dividends to build a portfolio is a bad idea. It's just hard to do on such of a small scale ($1 million or less) meaningfully.

[/quote]

Good points. I don't know, taking twelve k or so off a $500,000 portfolio and reinvesting - heck, more like fifty k and reinvesting if it was half in bonds - that sounds very, very attractive and could be the good cornerstone for a " mental financial plan " for a portfolio.

The thing I think about Warren is that being a retail financial advisor really has very little with what he does. You're right, he takes over assets, controls the cash flow, calculates his risk (insurance) - very nice. So you own some BRKB in your wrap accounts, and incorporate his thinking into your relationships with your clients.

Warren don't like us - but we can forgive him, because he's kind of Geeky and does not really understand how we help people. Good at what he does, but from my perspective, not a very well rounded guy.

Jul 10, 2007 5:46 pm

Question, after pounding my head against the wall for almost two years a while back when trying to set up a special fund for US investors via Europe, I ran into this ethics issue of commissions/fees.

We wanted to share the risk with the investors in that if the principal of the funds were ever violated due to poor choices on our traders part, that no fees would be taken on that fund until interest was gained.

We thought by setting a “higher” ethical standard, we would be attractive to potential clients. Imagine my surprise when we ended up playing telephone wars with DC lawyers, NASD and SEC representatives in regards to compliance. Of course we were dead in the water given our unwillingness to compromise. However, after 10 months of futility, we gave up realizing that we were too small and not connected enough to lobby any change to compliance regarding fee waiving policies.

So, the question is if Wallstreeter is telling the truth, how is he and his colleagues able to legally circumvent compliance issues regarding commissions/fees?

Yes, I understand discounting. That goes without saying, but to completely eliminate a commission or fee based on performance benchmarks is what I am talking about.

Jul 10, 2007 6:14 pm

[quote=DJRoss]Question, after pounding my head against the wall for almost two years a while back when trying to set up a special fund for US investors via Europe, I ran into this ethics issue of commissions/fees.

We wanted to share the risk with the investors in that if the principal of the funds were ever violated due to poor choices on our traders part, that no fees would be taken on that fund until interest was gained.

We thought by setting a "higher" ethical standard, we would be attractive to potential clients. Imagine my surprise when we ended up playing telephone wars with DC lawyers, NASD and SEC representatives in regards to compliance. Of course we were dead in the water given our unwillingness to compromise. However, after 10 months of futility, we gave up realizing that we were too small and not connected enough to lobby any change to compliance regarding fee waiving policies.

So, the question is if Wallstreeter is telling the truth, how is he and his colleagues able to legally circumvent compliance issues regarding commissions/fees?

Yes, I understand discounting. That goes without saying, but to completely eliminate a commission or fee based on performance benchmarks is what I am talking about.
[/quote]

DJ, Sorry for the confusion.  When I said that we take our commission out, I meant discounting to what basically amounts to covering our overhead.  So, no, it isn't completely eliminated, in essence, we just don't take it home.  It's legal.

Jul 10, 2007 6:36 pm

[quote=wallstreeter]

[quote=DJRoss]Question, after pounding my head against the wall for almost two years a while back when trying to set up a special fund for US investors via Europe, I ran into this ethics issue of commissions/fees.

We wanted to share the risk with the investors in that if the principal of the funds were ever violated due to poor choices on our traders part, that no fees would be taken on that fund until interest was gained.

We thought by setting a “higher” ethical standard, we would be attractive to potential clients. Imagine my surprise when we ended up playing telephone wars with DC lawyers, NASD and SEC representatives in regards to compliance. Of course we were dead in the water given our unwillingness to compromise. However, after 10 months of futility, we gave up realizing that we were too small and not connected enough to lobby any change to compliance regarding fee waiving policies.

So, the question is if Wallstreeter is telling the truth, how is he and his colleagues able to legally circumvent compliance issues regarding commissions/fees?

Yes, I understand discounting. That goes without saying, but to completely eliminate a commission or fee based on performance benchmarks is what I am talking about.
[/quote]

DJ, Sorry for the confusion.  When I said that we take our commission out, I meant discounting to what basically amounts to covering our overhead.  So, no, it isn't completely eliminated, in essence, we just don't take it home.  It's legal.

[/quote]

So what you're talking about is an informal discounting arrangement, not a formal compensation program.
Jul 10, 2007 6:58 pm

[quote=joedabrkr] [quote=wallstreeter]

[quote=DJRoss]Question, after pounding my head against the wall for almost two years a while back when trying to set up a special fund for US investors via Europe, I ran into this ethics issue of commissions/fees.

We wanted to share the risk with the investors in that if the principal of the funds were ever violated due to poor choices on our traders part, that no fees would be taken on that fund until interest was gained.

We thought by setting a "higher" ethical standard, we would be attractive to potential clients. Imagine my surprise when we ended up playing telephone wars with DC lawyers, NASD and SEC representatives in regards to compliance. Of course we were dead in the water given our unwillingness to compromise. However, after 10 months of futility, we gave up realizing that we were too small and not connected enough to lobby any change to compliance regarding fee waiving policies.

So, the question is if Wallstreeter is telling the truth, how is he and his colleagues able to legally circumvent compliance issues regarding commissions/fees?

Yes, I understand discounting. That goes without saying, but to completely eliminate a commission or fee based on performance benchmarks is what I am talking about.
[/quote]

DJ, Sorry for the confusion.  When I said that we take our commission out, I meant discounting to what basically amounts to covering our overhead.  So, no, it isn't completely eliminated, in essence, we just don't take it home.  It's legal.

[/quote]

So what you're talking about is an informal discounting arrangement, not a formal compensation program.
[/quote]

Correct.  Informal arrangements give you much more latitude and are legal.  It goes something like, "Hey, that trade didn't work the way we thought, let's show you we value your business." 

Jul 10, 2007 7:11 pm

Good stuff

Jul 10, 2007 7:20 pm

[quote=wallstreeter][quote=joedabrkr] [quote=wallstreeter]

[quote=DJRoss]Question, after pounding my head against the wall for almost two years a while back when trying to set up a special fund for US investors via Europe, I ran into this ethics issue of commissions/fees.

We wanted to share the risk with the investors in that if the principal of the funds were ever violated due to poor choices on our traders part, that no fees would be taken on that fund until interest was gained.

We thought by setting a "higher" ethical standard, we would be attractive to potential clients. Imagine my surprise when we ended up playing telephone wars with DC lawyers, NASD and SEC representatives in regards to compliance. Of course we were dead in the water given our unwillingness to compromise. However, after 10 months of futility, we gave up realizing that we were too small and not connected enough to lobby any change to compliance regarding fee waiving policies.

So, the question is if Wallstreeter is telling the truth, how is he and his colleagues able to legally circumvent compliance issues regarding commissions/fees?

Yes, I understand discounting. That goes without saying, but to completely eliminate a commission or fee based on performance benchmarks is what I am talking about.
[/quote]

DJ, Sorry for the confusion.  When I said that we take our commission out, I meant discounting to what basically amounts to covering our overhead.  So, no, it isn't completely eliminated, in essence, we just don't take it home.  It's legal.

[/quote]

So what you're talking about is an informal discounting arrangement, not a formal compensation program.
[/quote]

Correct.  Informal arrangements give you much more latitude and are legal.  It goes something like, "Hey, that trade didn't work the way we thought, let's show you we value your business." 

[/quote]

That'll fool the regualtors. They'll never figure out that you are guaranteeing a profit by not charging a commission for losing trades. Does you sperm donor know that you are here admitting to illegal activity and making outregeous claims about his business? For his sake, quit while you're only a little behind.

Jul 10, 2007 7:49 pm

Honestly this sounds like skirting to me. How do you define an informal arrangement, and when does it become standard praxis in that regulators come down on you?

Not trying to be a jerk about this, but after my experience with regulators, this was driven home rather clearly.

I can see onsies and twosies getting a special deal due to their standing as customers, but to collectively create an informal arrangement that spans the entire portfolio based on performance benchmarks smacks of serious compliance violations.

While the project I was involved in felt that sharing the risk was the proper way to go, there is the basis for existing regulation concerning the welfare of the client. Meaning that it is better for them to take a small hit on fees or commissions vs. lose their wealth due to increased risk taking by brokers who are stressed to meet benchmarks or risk not getting paid. It is a slippery slope to be sure.

Our project was a hedge fund construct using spot market currency strategies. The groundwork for this vehicle has yet to be completed, and has regulatory agencies still scratching their heads somewhat, however the vehicles which you use are well regulated, and there is no question regarding compliance. Given the clarity of compliance that we received regarding our project, it should be even more so for you and yours.

Jul 10, 2007 9:23 pm

Hey, Free Lunch....stockbrokers who do very well by their clients have been snickering for years.  There is less and less competition every year.  Fee based operations are more interested in rules, regulations, allocation, etc. etc. etc. and have no time to learn how to distinguish between companies.

The brokerage company exec's, however, are lining their pockets without any concern about the customer. If they were, there would not be dozens of products too complicated for the average banker to understand.

All people want to do is make money...bottom line...

Take the time to learn ....   you profit from the experience...

Jul 10, 2007 10:32 pm

larmisk, what kind of products are there that are actually that difficult for an average banker to understand? Also stock picking is far from a dead art (I use the term loosely)

The difference is actually that the general public is more informed now than during the ticker tape and quotron days. This means that when picking stocks, you have to not only motivate your reasoning behind it, but be prepared for potential concerns by clients that may have actually done some of their own DD.