Library:Where Are the Customers' Yachts?
| Where Are the Customers' Yachts? Or, A Good Hard Look at Wall Street | |
|---|---|
| Author | Fred Schwed Jr. |
| First published | 1940 |
| ISBN | 978-0-471-77089-3 unverified |
| Role | Analysis |
| Domains | Business, Finance & Scams |
| Tactics | Fraud or Scam Statistical & Evidentiary Distortion |
Where Are the Customers' Yachts? Or, A Good Hard Look at Wall Street is a 1940 book by Fred Schwed Jr.
Summary
Fred Schwed Jr. worked as a trader on Wall Street in the 1920s and lost much of his money in the crash of 1929. A decade later he wrote this short, funny and unsparing book about the gap between what the financial industry promises its customers and what it delivers. It has remained in print for more than eighty years and is still recommended by investors as one of the best books ever written about finance.
The title
The book takes its name from an old Wall Street story. A visitor to New York is shown the elegant yachts anchored in the harbor and told that they belong to bankers and brokers. After admiring them, he asks innocently: where are the customers' yachts? The joke captures Schwed's central point. The people who sell financial advice reliably get rich from fees and commissions, whether or not their customers do.
Forecasting and its pretenses
Schwed argues that market forecasts by brokers, analysts and advisers are no better than guesses, delivered with an air of authority that the forecasters' records do not justify. He describes how professionals explain every market move after the fact with great confidence, while being unable to predict the next one. He is skeptical of complex trading strategies and of the idea that anyone can consistently beat the market by being clever.
Conflicts of interest
The book describes how brokers earn money from customers' trading, not from customers' success, and so have an incentive to encourage frequent buying and selling. Schwed is equally pointed about the salesmanship of new securities issues and the optimism that pervades the industry in good times. He writes with affection for many of the people involved, but without illusions about their incentives.
Style
Written in a conversational, self-deprecating voice and illustrated with cartoons by Peter Arno of The New Yorker, the book uses humor to make serious points. Many of its observations anticipate later academic research showing that most professional investors fail to beat simple market indexes after fees.
Relevance to Bullshitopedia
Schwed's book is an early, accessible guide to recognizing the confident pronouncements of financial experts for what they often are: salesmanship. Its central question, who actually benefits from this advice, is one of the most useful tools for detecting financial bullshit.
Related entries
- Stratton Oakmont stock recommendations
- Bernie Madoff's steady returns
- A Random Walk Down Wall Street (Malkiel)