Saturday, March 28, 2009

This Little Piggy Went to Market

Okay, before I get started, let me apologize for this week's title. It has almost nothing to do with the subject of this post. As a matter of fact, the only thing even vaguely related is one word of the title, and then only if you use a different meaning of the word. If I'd wanted to spend countless hours thinking about it, maybe I could have come up with a better title, but as I've mentioned before, thinking of a title is more difficult than it might seem.

Anyway, back when I used to have money to burn, rather than burn it, I sometimes invested it in the stock market. The result was usually the same, but I didn't have to deal with matches or smoke or fire or ashes, so it was a little more convenient for me since I didn't have to worry about clean-up and lingering odors.

Since I never knew much about financial stuff in general or the stock market in particular, my investment strategy was pretty simple. I basically just put my money in stocks that other people I knew were investing in. This was all before the March 2000 bursting of the stock market bubble, when you could make money investing in just about anything.

I also had a couple of accounts with stockbrokers, and my results with them were about the same as my results without them: Sometimes I made money, and sometimes I lost money. There was one broker I trusted, and he always told me that whatever he recommended to me, he also bought for himself, but if that's true, he probably lost a lot of money. So sometime around three or four years ago, I decided to get out of the stock market (although the bulk of my retirement accounts are still in the market and are hence currently worth slightly more than the paper my quarterly statements are printed on).

But that's not what I really wanted to talk about. I wanted to talk about that one broker I trusted. He had an assistant, and I couldn't really tell in what ways she assisted him -- all I know is that whenever I called him, she answered the phone. So I figured she was more of a secretary than assistant.

Just as an aside, I'm not sure when it happened, but somewhere along the line, the word "secretary" became a pejorative term, and we started calling them things like administrative assistants instead. I think this happened in the late '80s when a lot of other job titles were subjected to the same sort of pointless elevation to a higher stature as well. Interestingly, perhaps, the term "secretary" is still okay when it's part of a title like Secretary of the Interior, or Secretary of Commerce, or Secretary of State.

Anyway, three or four years ago, I said goodbye to my stockbroker and his assistant, and I never heard from them again, until a couple of weeks ago, when his assistant (who is now his former assistant) gave me a call. She told me she was working for a new investment firm and, with the permission of her former employer, she was contacting some of his old clients. We talked for a while, and I told her I was pretty much out of the stock market, but she asked if she could send me a business card, and for old time's sake, I said yes.

I just got her card in the mail last week, and her new title is Senior Investment Consultant. That sounds like a pretty big jump in three or four years, doesn't it? From assistant to Senior Investment Consultant in just a few years. That has to be more than simple title inflation -- a Senior Investment Consultant is not just a fancy term for an assistant. But it makes me wonder if she was ever a Junior Investment Consultant or an Intermediate Investment Consultant. I always thought you had to work your way up the ladder, but maybe she was able to skip a few rungs. Of course, it's more likely that there's no such thing as a Junior or Intermediate Investment Consultant. I wouldn't buy stocks from one, and I don't think anyone else would either.

But getting back to the original topic, maybe I was wrong about her back when she was an assistant. Maybe her job consisted of doing more than just answering the phones. Maybe she was researching the fundamentals of all the companies my broker was recommending to me. I don't know.

But what's in a name, right? So it doesn't really matter what we call her. But even if her skills as a Senior Investment Consultant are unimpeachable, I'm sure there are plenty of investment consultants and stockbrokers with fancy titles who don't know much more than I do. What I remember is that for most stockbrokers I ever dealt with, the only real skill they needed was the ability to talk you into buying whatever stock they were pushing that day. If they hadn't decided to become stockbrokers, they could have been very successful vacuum cleaner salesmen. All they have to do is convince you that you really want what they're selling, and that if you don't buy it, you'll be missing a great opportunity that you'll regret for the rest of your life.

Or at least, that's been my experience. It seemed like the value of a particular stock wasn't based so much on anything about the company issuing the stock -- it was more about the salesmanship of the stockbroker. It seemed like they'd get a little bit of news -- like maybe one company was planning on merging with another company -- and use that to convince their clients that the resulting company's stock would skyrocket. Sometimes it happened, and sometimes it didn't, but the brokers got their commission either way.

So that's why I don't trust the stock market. Even when you're making money in it, you're usually not making money for any sound reasons. That's why people use terms like the "psychology of the market" -- the whole thing is just one big mind game, or at least, as I said before, that's been my experience.

So what's going on here? Am I trying to imply that we've got a bunch of unqualified people passing themselves off as qualified stockbrokers, and that's why the market is in the mess it's currently in? Or that the same incompetent stockbrokers were somehow responsible for the bubble that burst nine years ago? No. That would be overly simplistic, in addition to being completely untrue. So what's my point? Where am I going with this? I don't really know -- maybe I don't even have a point. I just got a business card in the mail and I sort of took it from there.