The phone rings, and it's your broker. Or maybe it's another broker, prospecting for clients, looking to replace the one you usually do business with. There is a conversation. A suggestion. Maybe a hot tip.
Ever wonder what's really going on at the other end of the line? Wonder no more. John Spooner, a senior vice-president in the Boston office of Shearson Lehman/American Express Inc., and author (under the pseudonym, Brutus) of the best-selling Confessions of a Stockbroker, has written a new book that answers the question in no uncertain terms. Entitled, subtly enough, Sex and Money, it lays bare the secret and not-so-secret lives of Spooner's colleagues, compatriots, and competitors in the stockbroking business. The characters, we hasten to add, are composites, not real people, and the office in the book bears only a passing resemblance to Spooner's own. But in this case, fiction is no stranger than truth.
To be published early next year by Houghton Mifflin Co., Sex and Money also explodes a few myths, offers a few suggestions, e ven reveals a hot tip or two, as in the excerpt below.
You think the investment business is stuffy? You think people sit around brokerage offices making important decisions involving millions of dollars with cold, rational judgment? I work in a carnival, a hurly-burly, and so does every other stockbroker and money manager in America. These days, of course, there are many new names for stockbrokers: Some firms call them registered representatives, some financial consultants, others investment executives. But it doesn't matter. Talk about tax shelters, annuities, mortgages, or insurance all you like. What really moves stockbrokers, regardless of what they're called, is the action on the Street. And that's a carnival. You don't believe it? Take Big Jimmy Minot. Every morning at 10 o'clock, Big limmy blows his whistle to signal the beginning of trading. He blows a regulation U.S. Army brass whistle that he wears around his neck to ward off potential muggers and to use as an exclamation point at the end of important sentences. Big Jimmy Minot has the office next to mine. He makes a good living as a trustee. A trustee usually watches or directs the investment of large pools of capital. In his case, Jimmy makes no decisions. He places the money with investment advisers who, when they buy and sell, put all the trades through Big Jimmy. Big Jimmy pockets the commissions.
After the whistle in the morning comes a cowbell, rung by Mad Mark the institutional salesman. Mad Mark keeps a cowbell on his desk because he is superstitious. One broker I know will never buy a stock beginning with the letter c; another will never buy a computer company; one friend of mine who left the business to make cheese in Vermont would never buy a company whose home office was in Dallas. These people all got burned by companies with the characteristics they will now forever avoid. Mad Mark the institutional salesman was given the cowbell by an oil exploration company he had invested in. "Every time we hit a gutbuster [a producing well]," he was told, "the news will be on the Dow Jones ticker. You ring that bell, Mr. Mark; you'll be getting rich." All the subsequent Dow Jones announcements reported dry holes, meaning extra payments and empty dreams for Mark. Mark rings the bell on every sad announcement, hoping reverse psychology will work. Big Jimmy tells him, "You can ring that bell till the cows come home before that outfit will find oil. That's why it's a cowbell." Jimmy's whistle drowns out Mark's bell; the market opens at 10 o'clock in the morning; the prices are off and running.
Our offices take an entire floor of a midtown bank building. There is a small reception area with a switchboard operator and various green plants. From this area, subdued and quiet, you enter the main boardroom, bustling with the clatter of the ticker, Teletype machines, newsprinters -- Dow Jones and Reuters -- telephones, and chatter. Private off run the length of the rear wall. The producers -- brokers generating more than a quarter million in gross comissions a year, of which they get roughly 40% before tax -- occupy the most space.
The office manager is tucked in the midst of these prima donnas, in a glass-walled office of his own with a couch, a quote machine, family pictures, and recruiting posters from the U.S. Marine Corps ("a few good men"). The manager is Elliott Smith, ex-Marine, ex-college jock. Elliott squeezes a squash ball most of the day, alternating hands. He also pushes against his desk drawers for isometric exercise. It s no fun shaking hands with Elliot. He has a three-word motto, done in needlepoint above his quote machine. "Up Your Gross" is his motto. This means that he is solely dedicated to improving all of his salesmen's gross commission figures. We call him "Up Your Gross" Smith, and he considers that a compliment. An ell off the main boardroom houses Mad Mark and the institutional section. The private offices along that wall house Big Jimmy Minot and, in the corner, myself, looking over the city.
You must know that under the tumult in brokerage offices lies the truth. And the truth is this: What are your numbers? How much business do you do? I have corner office and no delusions. I have bookshelves, an oriental rug on the floor, mementos of past victories on the walls, framed book jackets, the photos of the best-looking members of my family, a small ice chest, ficus trees, flowering plants. The day my numbers stop I know very well that out will go the bookshelves, into a box will go the photos. The ice chest will be sold at a discount to the new occupant. Stockbrokers lease their space from their employers. We create a commission dollar. The firm takes from this dollar roughly 60%. With the 60% they provide you with a desk quotation machines, phones, a secretary, and more sales help in terms of product and research than you ever thought possible.
You know the story of the stockbroker showing off his new yacht to a friend and the friend says, "Yes, but where are the customers' yachts?" A man I play squash with said to me last week, "You must have made enough in the last three months to retire." I always nod in agreement or smile slightly when anyone says this to me. The truth is that no broker I know or have heard of has made enough to retire in the last three months. Or indeed in any three months.
