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Mark: hi, may I help you? Visitor: what are the odds of picking a winning stock Mark: 2 in 71 mutual fund managers beat the sp500, after
tax, in one study.
Visitor: I have been a stockbroker for 5 yrs and have
made people money, but I always lose it in the end.
Mark: yes, did you see the book, “Robbing
You Blind”, it is a confession from a Merrill Lynch stockbroker.
Visitor: why
are people afraid to short stocks if the odds are against making
money on the long side
Mark: the problem: the markets are random
and efficient, but the odds are in favor of making money, the broad
market goes up 1%/month, on average, since 1927. Visitor: so why do I keep losing people’s money.
Mark: because you are gambling like a
player in the casino, you need to invest like the owner of the casino
Visitor: every
time I raise money to become a big broker it dwindles away,
so your saying I should own indexes? Mark:
that is the only way to invest in the market, and risk is the only
source of return. Visitor: hmm
Mark: the only question is how much risk
should each investor have; that is what we call CEO investing; capacity-exposure
optimization Visitor: I have taken huge risks with my clients Mark: you
do not even know how much, STOP IT NOW!
Visitor:
yea I do, lol (laughing out loud)
Visitor: I
have lost millions , but I am tired of looking for new clients.
Mark: what is the standard deviation
of your portfolios; that is how you measure risk.
Visitor: I
have tried everything from funds to the Investors Business Daily’s
ratings of a stock the problem
with commission based brokers is you can’t survive if you are not
trading stocks. Mark: yes!!!!!
Visitor: we
have to move money to survive. Mark:
get out of that business. Visitor:
but I made 65k after taxes last year Mark:
yes, but you are stealing from people, how can you sleep at night
Visitor: it gets
to ya. I have made and lost,
these people are rich and
they never get mad, but I would like to build up my assets, lol Mark: they should sue you, did you see "Sue Your Broker”,
in Money magazine
Visitor: they
know its a gamble, no? Mark: they are confused and so are you Visitor: hey I want to make people money, but it’s hard. I have opened an account for myself but never
bought stock.
Mark: WOW, now that is scary. Visitor: they have more money to lose than me Mark: I feel like I am running a confession session Visitor: lol Mark:
not the point at all, switch to a fee-only plan.
Visitor: I
have met all the analysts and fund managers, and then they are gone,
fired. Mark: yes Visitor: why don’t they know about this stuff, then. Mark: hang on, I want to get you a quote from our quote
database, see the library on our site for sources. Mark:
“If there's 10,000 people looking at the stocks and trying to pick
winners, one in 10,000 is going to score, by chance alone, a great
coup, and that's all that's going on. It's a game, it's a chance
operation, and peoples think they are doing something purposeful...
but they're really not.”
Mark: It's human nature to find patterns
where there are none and to find skill where luck is a more likely
explanation (particularly if you’re the lucky [mutual fund] manager)."
Mutual fund manager performance does not persist and the return
of stock picking is zero. Visitor:
wow, cool Mark: here is the one I wanted, you are the last guy, “There
are two kinds of investors, be they large or small: those who don't
know where the market is headed, and those who don't know that they
don't know. Then again, there is a third type of investor - the
investment professional, who indeed knows that he or she doesn't
know, but whose livelihood depends upon appearing to know.”
Mark: By day we write about "Six
Funds to Buy NOW!"... By night, we invest in sensible index
funds. Unfortunately, pro-index fund stories don't sell magazines.
Visitor:
yea, let me ask you this if most lose why not just short stocks,
are the odds better on the short side Mark:
because they go up on average, and because nobody can time the market.
Visitor: you
say stock picking is useless, so
you must feel it is better to short? Mark:
no, buy value stocks, better yet, diversify like portfolio 90 Visitor: but
why did growth stocks fly? I bought ADCT, SEBL, CSCO, SUMW, and
made a lot. Mark:
because things looked so good, for a while.
Visitor:
oh Mark: it
all depends on the cost of capital for the seller of equity. A low
cost of capital for the seller of equities, means investors should
expect a low rate of return for their capital.
Visitor: I like
the quotes. Mark:
you really need to read the web site. Visitor: I will look at the site, thanks, your a nice guy, really?
Mark: thanks, you can be one also. Visitor: were you a broker? Mark:
no, you need to stop gambling with peoples hard earned money. Visitor: to be honest my best clients
have mentioned to me when they were away in Vegas, I have noticed
that most of my clients go to Vegas and my biggest client goes to
the horse track, its all f**k you money it seems.
Mark: but that does not make it OK for
you to take their money for adding no value to the process.
Visitor: I haven’t
made money in a year and these people have hundreds of thousands
in the markets, it doesn’t seem like they care. Mark:
that is not the point, the point is, “are you prudently investing
their money?”
Visitor: so you
are the fund manager? Mark: I
am an investment advisor
Mark: we charge 0.9% of assets under
management Visitor: less than 1%?
Mark: how about you Visitor: I charge 2 to 3 % per trade, I’ll be honest, I am down
to $1 million
Mark: yes I know, my site is dedicated
to getting people away from brokers like you. Visitor: this market killed me Mark:
you are not alone Visitor:
I know Visitor:
clients got money by f**king people
Mark: no, you are wrong about
that. Visitor: these rich people get
there by cheating lying and stealing from honest people. Mark: business owners take on huge risks and work like
dogs. Visitor:
but let’s be honest, most rich people
get there money because they are stealing. Mark: I definitely disagree with you. Visitor: yeah? I worked hard for a
guy for 10 yrs, and I never made
more than 40 k he made all the money and I did all the work Mark:
from what you have told me, you didn't deserve that, :-) Visitor: I have never met a nice rich guy. I invested nothing and did 130k gross last year and took home
55%, minus the taxes. But honestly, this year I owe the firm $7,000.
lol; because I can’t make money on the down million and can’t raise
new money with this market. I am sitting on 1 million of dead money.
Visitor: your
site looks very good, impressive.
Mark: this is the right to earn money
in this business, it is always the right time to invest the right
way at the right risk exposure.
Visitor: its too late for me, I am stuck, but I hope you do
well. Mark:
you are never stuck, that sounds desperate.
Visitor:
oh I am stuck, I am 31,
lost my house and my wife, live
with parents and $5,000 in credit card debt. I am stuck, I need
to make some more cash so I can get out, before
I blow my brains out. I have
heard it all. Look, I am young but very smart. This economy is in big trouble, the consumer is going to stop spending very soon and housing
will crack. Are you short
stocks? Mark: no, that is the
brokerage industry’s (the really big casino's) way to get you to
gamble. After all expenses, it is impossible to CONSISTANTLY
make money. Visitor:
ok, know, I am seeing that Mark:
nobody can time the market. Visitor:
that portfolio 90, is that the highest return Mark:
you mean highest risk... investing is about risk, not returns, because
in the short term, returns are totally unpredictable. Visitor: maybe I will invest my money with you, well, I’ll look at your site, thanks for chatting Mark: ok,
good luck, and feel free to call me next week, bye.
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