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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