"One sometimes needs to read between the lines..."
Doug,
I sometimes think that one sometimes needs to look at the messengers motive as well as the message's content. The first stock I ever bought was at the recommendation of a long time acquaintance with a reputable mid-sized brokerage. He assured me this stock was his largest personal position and the brokerage was a major shareholder as well. (It was a small local bank stock) After I bought it he was confused about the commission amount and finally concluded it was lower than normal because the brokerage made a market in the stock and filled my order from their own holdings. In my naive state I thought "isn't that nice of them to sell me some of their own stock." Two years later, with the stock down 40% I asked the broker if I should just sell it and take my lumps. He agreed and informed me that he had sold his position a long time ago. It turned out the brokerage had also sold most of their position, starting at about the time I was buying. Did I get dumped on? I don't know. The important lesson I learned though was what the brokers job is. My initial belief was that the brokers job was to help me make money. That was wrong. His job is to make the brokerage money. They are the one's paying his salary. If I make money as well, that's a bonus, but it's still secondary to his real job.
If someone is, say, an instututional advisor, their job is to recommend investments to those clients who are paying their salary. If he recommended an investment that went bad, wouldn't it be his job to try and create a market for that investment, enabling his employers to unload their unwanted position? I honestly don't know, but, whenever I see "free, expert" advice, I always wonder," is this guy throwing me a bone out of the goodness of his heart, or, is he doing his job?" |
