Where Are the Customers' Yachts?: or A Good Hard Look at Wall Street (Wiley Investment Classics)

So, you want to make money on Wall Street? Good idea, only be wary of investment counselors, stock brokers, or anyone purporting to have all the answers, such as authors of books on investing. Fortunately for us, Fred Schwed is not among them. His is a cautionary tale. He's worked on the Street and knows of its many pitfalls. Yes, his book was originally published in 1955, but as Jason Zweig (Money Magazine) points out in the introduction to the 2006 edition, nothing has changed. "The names and faces and machinery of Wall Street have changed completely from Schwed's day," writes Zweig, "but the game remains the same." The fact is, says Schwed, no one can predict the future with accuracy, but that is exactly what Wall Street analysts, investment counselors and ambitious stock brokers are claiming to do. It can't be done. The Wall Street game is nothing less than a crap shoot, with lots of losers and few winners, and the winners often end up losers. Who makes the big money on Wall Street? Investment bankers and brokers--from their exorbitant fees. They are the fat cats with the yachts parked out on Long Island, not the clients. Schwed aims his harshest criticism at investment counselors. "(They) allocate the funds between themselves and their clients in the ancient classic manner, i.e., at the close of the day's business they take all the money and throw it up in the air. Everything that sticks to the ceiling belongs to the clients." The authors makes a fine distinction between Wall Street speculators and investors. Speculators are the quick-buck artists hoping to make a killing; they don't. Investors are patient and looking for some place to put their money for the long term; they are the ones who actually make money. Put another way: "Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little." Schwed's book is funny, wise, a splash of cold reality. While filled with irony, it's not cynical. The author, who reportedly lost a bundle on Wall Street, remains a believer. "I have a sneaking fondness for that wretched old hag, the capitalistic system . . . we had better preserve our financial machinery even with much of the nonsense still adhering to it . . . The only successful method so far devised for getting millions out of the public, for enterprise both good and bad, is some system similar to the devious mechanism of Wall Street." Bottom line: no one on Wall Street has the answers. It's a guessing game. Be smart: invest for the long term, and maintain a healthy dose of skepticism.

This is an awesome book. It is funny and it feel contemporary. Schwed has an amazing way with words and a deep insight on the market. The only thing that feels off is that there are some references that were contemporary with the writing of the book that feel a little off. FOr example, there is a reference to Hitler that makes it seem that the crimes of Nazism had not been fully brought to life. Other than that it is funny and easy to read. THe customers still don't have any yachts, but we can't blame Schwed -- he admits that knowing the problem is not the same as knowing the answers.

Here are the highlights that I found: - The title of the book was more popular than the book itself because it was sold at a time when the market was down. This edition was left pretty much like the first edition because he wanted it to reflect what he was thinking at the time. - The author, being a financial writer who treats his subject lightly, sold his stock too frequently. He would have been better off to keep his positions. (My research: this meant a 9.0% annual return from 1940 (1st edition) to 1955 (2nd edition).) - Financial statistics can be deceiving because they can give a lopsided view. It is human vanity to think the market can be predicted in two+ years. Look at how many on Wall Street were fooled by the crash. Wall Streeters tend to be romantics and dreamers. - Bankers do the opposite of what is needed - they lend money in prosperous times and retain money in bad times. The economy needs the opposite - curtail spending in good times and encourage it in bad times. - Customers buy when stocks are high and sell then they are low. Chart reading doesn't work. (I think it does in identifying trends, but of course there is no guarantee the trend will continue.) - Finances in Wall Street are hard to discover. - Customers tend to misuse margin. They also do not like to have a lot of cash in their account. They will tend to churn their account to keep from being bored. - History shows investment trusts aren't very good. There is strong temptation for them to be dishonest because of the great sums of money they manage. Clients demand a high return which causes the managers to take risks. - It doesn't work to buy popular securities because they are probably overpriced. - The public vilifies short sellers during and after a panic. Short's impact on the market is minimal because their numbers are so small. - Three kinds of options: puts, calls, and straddles. Limited liability - options act like "term" insurance. A straddle is a put and a call bought together - stock must move sharply. Option costs are high. - The speculator doesn't think of a company as a business, but rather as a stock ticker. - Tape reading does not tell you what the buyers and sellers were thinking. It is simple probability that some speculators will be successful. - A man's true wealth is his income, not bank balance. - Customers who have lost money tend to think they have been robbed rather than take responsibility for their actions. Bad luck plus bad brains. The book was very readable.

This funny book is a mild rebuke of Wall Street operators and Wall Street customers alike. In fact, there are many more outright crooks on the street than Schwed lets on, specially if they perceive you as an easy mark, an orphan or a widow. I speak from experience having seen them churn an account to milk it of commissions. I was delighted to discover how old some of the Wall Street sayings are. It seems that nothing really changes in the human condition. One passage I found very entertaining is about a large group of Wall Street operators competing in a coin tossing game. As soon as you lose a toss, you are out of the game meaning that with each toss half of the players are gone. If you start with 500,000 players, after 15 tosses you have about 16 people left in the game. According to Schwed, these lucky people will soon take on airs of expert coin tossers even if they are winning based on pure luck. What I found amusing was that the author of a recent investment best seller uses this exact scenario to "prove" that most people who make money investing are just lucky. I wonder if this unnamed author read Schwed. I found one commentary rather unnerving. Schwed say that you cannot buy "competence" on Wall Street. You can find a competent plumber and a competent lawyer or doctor but you cannot find a competent investment advisor. While I'm no fan of Wall Street operators, this statement seems over the top. They might be hard to find or maybe the competent ones don't need clients, but that there is a total lack of competence on Wall Street must be an exaggeration. Read the book and be prepared to be entertained and instructed. There is a lot of solid Wall Street experience behind the humor.

this book is enjoyable, and accessible for ALL readers. timeless truths and wisdom laid out in a way that is so fun to read for all investors, including the novice. this is the first book i give any friend who shows serious interest in investing. Mr. Schwed makes the valuable point that if we have a belief that something is worth buying, to do so when it feels very hard to do so (i.e. when it is an unpopular idea in the media, with brokers, banks,etc...) and to sell it when enthusiasm for the investment thesis abounds (for example, on the cover of popular culture magazines, or when your manicurist tells she she just place her 'buy' order, etc...) want to know what makes a broker tick? read this one.

It was often told to me that when you got a "system" on investing in equities on Wall Street and it fails,now is the time to write a book about it.The fact of the matter is that the stockholders are the last in line behind any debt holders in the corporate chow line.That this is in any way amusing and is also the basis of any subsequent speculation is amazing. Originally,shareholders could subscribe to an underwriting and they would pay up till they reached par value.This was their responsibility and,of course,they would be entitled to dividends derived from actual earnings.How things had changed by the time the author was investing.The stock probably had no par and they could buy on margin.There really wasn't anybody to blame for this.The Securities & Exchange Commission didn't show up until 1934.Their job is to protect "unsophisticated" investors.So the author experienced something close to humbleness and he told everybody. Let's remember this book is a classic.You can find people like those he found in brokerage in any business.What can I tell you?Do your own research if you have the time.Always,always seek professional advice.You worked hard for your money.You paid your taxes and after living expenses,you might want to invest something.Deducting losses is little solace.

Put down that ugly brokerage statement from the busted, dot-gone Bear market. Skip that news report of the latest bankruptcy filing and spend a couple of whimsical hours with author Fred Schwed, Jr. WHERE ARE THE CUSTOMERS' YACHTS? is a rejoinder to Wall Street's inflated self-confidence that begins with that classic question. Schwed's conversational style makes this a quick read. His style is 'wry', 'dead-pan', 'droll' - a bit of Andy Rooney, maybe a bit of 18th Century novelist Lawrence Sterne. Schwed looks back to the 1920's (published 1940, republished 1955) as "one of the great universal delusions of history" a period of "supreme miscalculation". It was a kind of grand "nonsense" we can relate to in our own post-internet bubble period. Schwed is more humorist than moralist. Misdoings on Wall Street are "overrated" often a mix of "bad luck and bad brains". Advisors are "romantics" who genuinely believe that the market's movements can be predicted. Often they become victims of their own "confused sincerity". Technical analysts are "pathetic", persuading themselves of predictive patterns in stock charts and statistical data. In the end market activity may repeat itself, but often "ponderously, with an infinite number of variations." Schwed takes the side of short sellers, an unpopular bunch who weigh against the general herd to profit when the market declines. He notes that such professional cynicism is never tolerated in an un-free society. Years before the Wall Street Journal began 'testing' the efficient market theory (EMT) selecting stocks with darts, Schwed relates the apocryphal story of a bank trust officer's relative success selecting stocks from his pen's random ink spots. In a timeless passage, Schwed summarizes his investment program: "When there is a stock-market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them. Take the proceeds and buy conservative bonds...just wait for the depression...sell out the bonds...and buy back the stocks....Continue to repeat this operation as long as you live, and you'll have the pleasure of dying rich." Who can argue with a contrarian strategy that would have worked wonderfully in recent years.

Recommended to my husband by financial people. It is an old book but has basic, sound advice for investing, even in today’s market. Bought it used but it came in great condition.