a a few years Before a stranger sat across from me at a conference. I have been introduced as a stock seller with over 30 years experience. “Success or failure?” rudely asked. I laughed. When I started working on the stock exchange, anyone over 50 had an air of defeat. If they did not earn enough money to retire early, they were seen as losers. Well, I’m still here and I’m not the only one. There is a lot of gray hair in sales offices these days.
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This is not the only change. Trading returns are lower, due to regulation and new technology. The way sales-side analysts and salespeople are paid has changed. But the biggest difference lies in the types of conversations I have and with whom I have them. Twenty years ago, I rarely spoke to the fast money audience. Now most of my day is taken up with them. Stock prices are determined by margin. The marginal buyer and seller is the hedge fund manager.
Hedge funds are behind a lot of the recent dramatic market events. The minutes of the Federal Reserve’s rate-setting meeting last week served as the trigger. The immediate prospect of monetary policy tightening has motivated hedge funds to sell expensive “growth” stocks, particularly those of technology companies, whose earnings are expected to continue well into the future. These far profits must now be discounted at a higher rate. So tech stocks fell. At the same time, a lot of funds bought cheap stocks.
I specialize in a sector experiencing selling pressure. But most of my hedge fund clients trade on a more subtle level. They want to bet on the most flexible stocks in my board and against the ones that will falter. What matters to these “long-term” traders is that their buy trades work better than their sell trades. Their investment horizon is days and weeks, not months and years. There are a lot of these hedge funds that trade a lot of stocks. That’s why there’s noise beneath the surface, the stock market.
Customers want to talk to me. I know my profession well. I have a good team of analysts behind me who are in regular contact with the companies. And I talk to a lot of other investors. Everyone has the same hard data — stock price, financial data, consensus forecasts for earnings and the company’s “guidance” around those numbers. But hedge funds try to anticipate short-term shifts. They come to me for soft data.
I am asked all kinds of questions. How confident is the company’s chief financial officer? X It seems about the composition of numbers? How strong are stock investors – are they committed bearers or will they get rid of the bad news? Does anyone think of buying burnt stock s? Is company X Be open to acquiring a company s Or is it still absorbing its last purchases? Nobody asks for a rating anymore. When I hear a hedge fund manager say a stock is cheap or dear, alarm bells ring. He usually tries to “break the reverse”, i.e. influence the market by influencing me.
The buy side is used to reward us with fat commissions. Now the largest brokers allow clients to use their systems to trade directly on the exchange at a very low cost. The regulators insist that the buy side pays directly for our advice. These clients agree to pay a fixed amount each year. My performance is measured by ‘interactions’: the phone calls I make, the meetings I arrange and the requests I respond to. Hedge funds are particularly hungry for information. So they pay well.
The buy side was once a nice place to be. Before passive investing hits fees and performance, it can make money managing money. If you get drunk on a regular basis, he will charge you some commission. I still talk to clients whose investment horizon is five years, not five days. But the talks are more serious. Loud lunches were organized. Nobody has time for them anyway. A sell-side trader is a sign of cultural change. The old school version was a red-faced bruise called Fat Matt or Cardiac Kev. The new model is a triathlete.
Improved health may explain why there is more close-to-gay sex around me. It’s basically a group effect. The city grew rapidly in the 1990s. Everyone who read Liar’s Poker thought he would get rich in sales. But listed stockbrokers have since lost their charm. Finance graduates are now choosing careers in private equity — or in hedge funds. My generation is stuck around. success or failure? You have survived several rounds of cuts. I have a job that I enjoy. I still get paid well. I guess that counts as a success, right?
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Read more from Buttonwood, our financial markets columnist:
Why gold has lost some of its investment appeal (January 8)
Why capital will become scarcer in 2020 (January 1)
Why the Dollar’s Rise Won’t Continue (December 11th)
This article appeared in the Finance and Economics section of the print edition under the heading “Sexagenarians and the City”