The House Wins Every Time

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


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  1. 2% attrition in Brokers seems pretty low to me. How about auto workers or bankers. Wish I would of had 2% attrition in my accounts last year. Sounds like a slow news day at WSJ.

  2. Two of my neighbors just shared that “trading has been very good this year; they are making $1500 to $1700 daily!”
    It reminds me so much of my imprudent, high-risk old times…I smiled and gave them the URL to your site 🙂

    • Diana: Thanks! We all been there and done that 😀

    • Oh man, that is one big sentiment sign. Thanks for reporting from the field!

  3. “Day trading is not a get-rich-quick scheme” yep…it’s taken me 5 years of pain and research to improve the % of $ I make on my trades. Your site and the tools available are no doubt some of the keys to my success.
    I know everyone is waiting for the results of the bank stress tests zzzzzzzzzzzzzzz…but as an aside, if it’s not already apparent I’m somewhat of a spaceman (my father was a rocket scientist for 35+ years). Something more exciting is also going (should) to be announced on Thursday. The new NASA budget…hopefully we get some dialogue (a No Go) on the subject of Bush’s old plans to go back to the moon. I say we skip the moon and go straight to Mars! I think we have just the right president to make it happen.,28348,25340647-5014239,00.html
    ET phone home…

    • LegalX: Hey that is a VERY cool picture haven’t seen that before. Thanks for some non “bank stress test” related news.
      Maybe E.T. is ‘leaking’ all the classified stress test reports 😉

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