As a one-time stock broker on Wall Street I took great interest in two recent events. First, the DOW took a bow last Friday sending investors into varying stages of panic. All are now focused on their Ouiji Boards to see the future. My personal opinion is that there will be a substantial correction (read drop) in the market through most of this year. All agreeed that the market was being boosted by the Federal Reserve’s massive injections of cash into the economy which seemed to wind up in the stock market. And the Fed will be reducing this flow of funds so one can easily assume there will be a correction due to this change.
I am mystified by those who insist that problems in “emerging markets,” usually citing devaluation of such “mighty” currencies as the Argentine peso, as somehow affecting the New York Stock Exchange that in three days trades an amount equal to the annual economy of Argentina. There is no link between “emerging economies” and the “Big Board” other than the relatively small effect of lower export opportunities for US firms to “emerging markets.”
My personal guess is that the market will suffer another bad week and there will be no end in sight. Sell today is probably what most investors are hearing from their brokers. And that is not bad advice unless you wait too long. Of course all this would be stopped in its tracks if incoming Fed Chief Yellin says she will keep Fed funds flowing into the economy at the same rate as that of the last five years.
The other Wall Street event was the film, “The Wolf of Wall Street.” I saw this with a friend who asked me if stock brokerage houses were as depicted in the film. I said the only relationship between the film’s scene and the real scene at where I had worked, the then Dean Whitter’s most go-go operation in Wall Street, well actually the World Trade Center which had come to house most Wall Street brokerages, was the massive chaos of the trading floor with noise from all quarters a constant problem. I noted that by the time I got to Wall Street traders’ phones were little boxes on your chest, a microphone and an earphone which allowed one to use his hands to search for materials on his computer. I said if Dean Whitter had the bacchanals shown in the movie I certainly was not invited,
In fact I did not stay too long at Dean Whitter since, as the film clearly showed, the job was to work at the phone for hours on end developing names and numbers of buyers who were then turned over to senior brokers. The new comers were definitely there just to develop hot contacts, not to take care of a list of his or her clients. This was not my personal game plan so I switched to foreign currency trading, which, as was the penny stock trading seen in the film, is not regulated.
The foreign currency game is fraught with con games such as the “Wolf’s” operation. I recall the first place I worked and where I learned the basics of currency trading, most importantly currencies are traded in $500,000 blocks between banks so anyone coming in at less than half a million was trading on the back of a bank. I quickly made friends with the only other “old boy” in the crowd of newcomers, Dan Constantini, a real New York boy who had seen it all. Dan and I were amused to find that the main techniques used by currency traders were the same number sequences used to play black jack.
To prove the dicey nature of currency trading operations I returned from closing down a company I had set up in Orlando, Florida one day to find on my arrival at my currency trading company that the entire building had been closed down by the police with the bright yellow police tapes across all egresses. Fortunately I had not yet put any of my money or my investors money into the operation so simply walked away. I tried a few other trading houses until I found a legitimate one operated by two Russian immigrants. I knew that I did not have the cold steel nature required to successfully do the actual trades so resorted to selling shares in trading funds set up by the Russkis. The funds did well and my clients prospered.
Wall Street is a fascinating world and one can get rich. Usually the broker winds up making a comfortable living and sending his kids to the right schools. From there I went into making clothing for young women in London, England. Much more glamorous than shilling stocks by phone on Wall Street.