The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

Shakespeare’s Rule

These types of discussions about how Wall Street makes money invariably invoke strong emotional reactions on Wall Street. This is why the Shakespearean rule of investing is helpful: “Me thinks thou doth protest too much.” The intensity of Wall Street’s criticism of an issue is typically inversely related to the amount of good that any proposal or idea will do for John and Jane Investor. Many people at the highest levels of Wall Street know this, yet they do little to nothing because there is little to be gained standing up for a group that generates a small amount of money. If you still think banks do not think about fees, you are wrong. In the midst of the financial crisis, a sales trader at a top international bank accidently e-mailed a confidential client form to a group of investors. The e-mail identified confidential information about a hedge fund client. The e-mail included the number of years of experience of the hedge fund trader, and the amount of annual fee income that trader paid to the bank. The amount was $250,000. That is real money, and that is where Wall Street directs its attention. Individual investors are road kill. Harsh words. True words. And it is a reality that many sophisticated people actively monitor.

A senior executive at one of the world’s top exchanges is so concerned with making sure he doesn’t get mugged by Wall Street that he pays a financial planner to supervise his brokers. He says he wants to make sure that the brokers are not ...