During my early years of the game, stock trading or investing wasn't in vogue yet--at least in my professional circle. One time, it so happened that a conversation drifted into stocks and a friend of mine who is a geologist, has been a punter (probably the best translation of tsupitero) in oil and mining stocks and introduced me to Mon, his broker.
Mon, a likable and helpful guy, dutifully carried out my orders. Sometimes he feeds me news on some developments in the market and even makes unsolicited advice on what to buy or sell. His messenger comes and collects payments for my BUY orders or delivers checks resulting from selling. Sometimes he alerts me to companies undergoing an initial public offering (IPO) and I actually obtained IPO shares through him. IPOs are special events and if you are lucky, you could gain a lot, percentage-wise in a matter of days. That would be an interesting topic to deal with in a separate post.
My favorite broker (actually, he is the trader) has been so kind and friendly that I followed him whenever he transfers brokerage houses.
Traders and brokers primarily earn their keep by commissions on every trade. The average trader would have you induced into making more trades than you need to. Brokerage houses also issue newsletters invariably labeled "for clients only" to make it appear that you have been granted exclusive peek at privileged information.
These newsletters ostensibly contain an analysis of the economy, sprinkled with Consumer Price Index data, movement in forex rates in the last 24 hours, closing numbers of the U.S. DOW and NASDAQ indices, and other trivia--public information really. But the bottom line is, the analysts who wrote those pieces would tenuously connect those figures to their stock recommendations--usually a BUY or HOLD; almost never a SELL. The rare times when you see a SELL recommendation, is when the stock has already been battered black and blue, and the so-called "strong hands" have already fled.
A classic case of closing the gate when the horses have already galloped to freedom a long time ago.
We will be examining the modus operandi of these brokers later from the point of view of the small investor.
The information contained in the brokers' newsletter is useful, mind you. But you don't have to take the analysts' words hook, line and sinker. You have to be discerning. Subject the data to severe stress tests. Find other collaborating or adverse information. Then take action based on your best judgment.
This is the recurrent theme in this website: taking charge of one's finances.
Now, what happened to my favorite broker? For several years, I have had my own ups and downs, and have shied away from the market. When I closed my person-broker based account last year, I was informed that my favorite broker no longer works there and I presumed he has retired.
Who is my present favorite broker?
None. At least in a human form. In the last few years I have shifted to online trading which is, in a sense, a liberating way of taking charge of oneself.
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