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4 Pillars
chp 9
| Question | Answer |
|---|---|
| Pillar 4 | Business of Investing |
| Is your broker your friend? | Absolutely not. |
| Charlie Merrill | Took over Merill Lynch in 1934, died in 1956, repulsed by corrupt financial market, wanted to bring wall st to main st, Paid his brks a salary not commission, disclosed co interest in stock positions |
| Regan | saved Merrill Lynch when brokers were leaving by allowing brokers to take part in commissions. This betrayed Merrill philosophy about the company |
| Collecting commissions | brokers would turn clients into cash cows to be methodically milked for a commission. |
| fidelity and Vangaurd | championed inexpensive investments for the investor |
| Stock Broking seamy underside | SEC pays little attention to the fees that brokers charge and have little knowledge of the training of brokers as a group. |
| Fees | brokers are very quiet about the fees. Why? The investors return is the ROR minus the expenses. It is in the brokers best interest to keep these fees as high as possible. |
| sad fact | you can pass the series 7 test and start advising people faster than you can get a manicurist license in most in most states |
| asset recommendations | rarely treasury securities recom, or no load funds, these do not have earning for the broker. |
| spreads | bid-ask, the difference between the two is the profit to market maker. |
| double dipping | charging a commission on a transaction that already has a spread. this is illegal but not uncommon. |
| specials | stock bought in bulk by a stock house and passed on to the investor as a great investment, toxic wastes that brokers get prizes for when unloaded on clients |
| average broker | nothing more than a salesman, they get a stock tip from analysts that broadcast to everyone all over the country. By the time it get to the small investor it has already been bid up by the larger firms |
| Flow of financial information | Analyst, to broker to investor, flawed b/c threatened with discipline or worse for making unfavorable recommendations about companies, |
| can you trust the broker? | probably not because the analyst is pressured to give him certain information |
| problem with brokerage houses | geared toward excessive trading that generate fees and spreads |
| Most shocking item about brokerage firms | almost never calculate the ROR of their clients let alone try to improve them. |
Created by:
delorya
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