No doubt you’ve heard the mantra: the 2008 crash “proves” that buy and hold is pointless, so everyone must trade. It sounds nice, but ignores the glaring fact that most professionals — the mutual fund and hedge fund managers — also got buried. Isn’t this the stock market version of “Out of the frying pan, into the fire”?
Pete found an interesting article this morning at WSJ:
Brokers Abandon Wall Street
In April, more than 2,800 people registered as brokers in the U.S. left the industry, according to the Financial Industry Regulatory Authority. The total number of departures so far this year stands at 11,600. In 2002, the previous high-water mark for industry exits in the 15 years of data available from Finra, a total of 11,500 brokers left Wall Street.
At the current pace, nearly 35,000 brokers would exit by year end, which would leave about 630,000 registered brokers. The final tally will partly depend on whether the stock market builds on its recent rally, which likely would persuade some brokers to stick around. Part of this group, meanwhile, is simply being shown the door.
It’s gets better:
T.C. Nelson, a former financial adviser and client-relations specialist at Bank of America, left the bank last May when new business started drying up. “It was tough to make money,” says Mr. Nelson, 38 years old. “As soon as real estate started to pull back, you were kind of spinning your wheels.”
In July, he also became an independent trader. More recently, he started looking for a second job that could give him better health-care benefits.
. . . .
John Canale, a former Morgan Stanley broker, has been trying to give brokers an alternative. In recent months, he has brought several former brokers over to his proprietary trading business.
At his small Boston office, the recruits become traders who bet on stocks with their own money or capital from a trading firm. Mr. Canale tells his new colleagues that trading for their own accounts is easier than managing clients’ money in a stock market that lost an estimated $7 trillion of its value last year.
“This is a recession-proof job compared to being a broker,” says Mr. Canale, whose firm, called Blue Hill Capital, executes its trades through Bright Trading LLC. “When you’re a retail broker, you just have to sit and wait for a bull market.” Becoming a trader has allowed him to be more “nimble,” he says.
Isn’t it sort of ironic that these brokers are now the ones paying commission. Methinks they shouldn’t give up their day job.
MORE: Heebner’s Trading for CGM Focus Fund Almost Tripled in 2008