{"id":34176,"date":"2012-12-09T13:48:04","date_gmt":"2012-12-09T18:48:04","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/12\/review-backstage-wall-street\/"},"modified":"2012-12-09T13:48:04","modified_gmt":"2012-12-09T18:48:04","slug":"review-backstage-wall-street","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/12\/09\/review-backstage-wall-street\/","title":{"rendered":"Review: Backstage Wall Street"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

\"\"<\/a><\/p>\n

\u201cNo one who is currently working in the investment advisory or asset management business will ever say the things I am about to say,\u201d writes Josh Brown in the opening lines of Backstage Wall Street<\/a><\/em><\/strong>, his expos\u00e9 of the Wall Street brokerage machine.<\/p>\n

Brown may be pushing it when he says \u201cThere is no such person as me in all of finance,\u201d but the always irreverent author of the Reformed Broker<\/em><\/a><\/strong> blog has written an excellent narrative that shares all of your broker\u2019s dirty little secrets.\u00a0 Much like Michael Lewis\u2019 Liar\u2019s Poker<\/em><\/a><\/strong> captured the essence of 1980s institutional Wall Street, Brown\u2019s Backstage Wall Street<\/em> recreates the boiler room retail brokerage culture of the 1990s and early 2000s in vivid color.<\/p>\n

And he shares it from a working man\u2019s perspective\u2014what Brown calls “Blue Collar Wall Street.”<\/p>\n

\u201cThis is not the white-collar world of financial executives and business lunches and client meetings and asset allocation.\u201d This is a world in which 300-pound fat men sweat profusely while giving pep rallies and threaten 20-year-old junior brokers with lines like \u201cUnless I see 10 new accounts opened before lunchtime, not a single one of you losers is leaving this boardroom for lunch.\u201d<\/em><\/p>\n

It is the world of aggressive cold calling\u2026and of young brokers resembling the cast of The Jersey Shore<\/em> guzzling Red Bull and chain smoking in alleys to make it through the day.\u00a0 And most of all, it is the world of generating gross commissions.<\/p>\n

Thankfully\u2014and to Brown\u2019s great satisfaction\u2014the world he describes is Backstage Wall Street<\/em> is dying.\u00a0 Two major bear markets in a decade, the advent of dirt-cheap internet brokerage and low-cost ETFs, a regulatory crackdown, and general public disgust with Wall Street have all conspired to undermine the traditional brokerage model.<\/p>\n

Brown himself escaped the soul-crushing existence of being a retail stock broker and is now successfully practicing as a registered investment advisor (RIA), hence his moniker \u201cThe Reformed Broker.\u201d As Brown explains\u2014and as I agree loudly and completely\u2014the RIA model puts a professional on the same side of the table as their client.\u00a0 The client is no longer a chump to be sold to; he\u2019s a real person who is paying you for legitimate investment advice. This is the direction the industry is moving, as it rightly should.<\/p>\n

In his attack on the Wall Street establishment, Brown doesn\u2019t stop with stock brokerage.\u00a0 He takes on the mutual fund marketing machine, with its multiple share classes and criminally-high sales loads.\u00a0 He takes on private placements.\u00a0 He takes on the investment banking business.\u00a0 And he does it all with a healthy amount of dry humor.<\/p>\n

Brown\u2019s preferred investment vehicle is the exchange-traded fund (ETF), and I share his enthusiasm.\u00a0 The low-fee structure, tax efficiency and lack of sales loads make them preferable to mutual funds in most cases.\u00a0 But even in the world of ETFs, Wall Street has gone to its characteristic excess: \u201cIf you\u2019re looking for a way to play Chinese small-cap footwear retailers whose CEOs were born in April, there\u2019s probably an ETF for that,\u201d Brown writes (mostly) in jest.\u00a0 \u201cNo one ever woke up in the middle of the night worrying about whether or not they had enough exposure to beryllium prices or Brazilian hospital real estate or (fill in the needless opportunity).\u201d<\/p>\n

Backstage Wall Street<\/em> was not written to make you a better investor; it\u2019s not another \u201chow to\u201d book.\u00a0 But if you are an ordinary investor who depends on the advice of a broker or financial advisor, then it is a book you absolutely must read by a man who has seen it all from the inside.<\/p>\n

In the same vein, Backstage Wall Street<\/em> should be required reading for any undergraduate who dreams of a career in finance.\u00a0 It will certainly shape the direction their career takes.\u00a0 (Alas, I\u2019m not sure that some of the semi-literate knuckle-dragging brokers described in the book would even be capable of understanding it.)<\/p>\n

Compliments to Josh Brown on a book well written.<\/p>\n

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