Brain Snappers and Other Wall Street Nonsense
by Al Thomas
The last time you spoke with your broker did
he use any of the following words? Diversification,
Price-to-earnings ratios, discretionary trading,
lifting a leg (hes talking to you not your
dog), leverage, divergence, fee-based
compensation, escalator clause, tactical asset
allocation and other mesmerizing words to place
you in stupefying shock.
Brokers do that to let you know that you
dont know anything about the market and you must
allow them to make decisions for you. You dont
know the language. You are just too dumb.
Another mushroom.
Wadda ya mean mushroom? Didnt you know?
Most customers are considered mushrooms. A mushroom
is grown in the dark and fed horse manure. Now
you understand why they treat you that way.
Then try to get him to explain commission
structures of mutual funds. Oh, youre not
allowed to ask that. You might want to read page
35 in the January 31, 2005 issue of Newsweek
magazine for an excellent breakdown of this Wall
Street scam. Maybe you better not. You will get
mad at your broker.
Another one of those big words they dont want
to discuss is redemption fees. This is an extra
charge of as much as 2% of the amount that is
deducted from your check if you sell within a
certain period of time. Brokerage companies tell
you it is to discourage frequent short-term
trading which adds to their cost of doing
business and increases the expenses that are
charged to you every year. Having owned a
brokerage company I can tell you this is more of
that brown stuff they feed to the mushrooms.
The reason for redemption fees is to discourage
you from selling. You might take money out of
your account and that must be restricted in
every way possible.
Some of the biggest words are associated with
those special limited partnerships. These are
definitely brain twisters. You can get these in
real estate, hospital construction, oil and gas
pipe lines and the most confusing one of all is
technology. And they are all guaranteed. That
word I understand, but be sure you read the fine
print to see what is guaranteed. You remember
the old one that they give it to you in the big
print and take it away in the fine print.
How about placing a limit bid on a secondary
distribution of a special claim on residual
equity certificates? You didnt understand that?
Believe me you dont want to.
When you are solicited by your broker, financial
planner or anyone to buy any equity you must
clearly understand what you are buying.
If you dont understand it dont buy it.