Advice to Chinese Investors from former Stockbroker Charles McCain

Traders and company executives of 58.com and Essent Group crowd the trading floor of the New York Stock Exchange during two IPO's, Thursday, Oct. 31, 2013. (AP Photo/Ben Hider, NYSE)
Traders and company executives of 58.com and Essent Group crowd the trading floor of the New York Stock Exchange during two IPO’s, Thursday, Oct. 31, 2013. (AP Photo/Ben Hider, NYSE)

 

I became a stockbroker for Shearson Lehman Brothers in Palm Beach FL when I was 27 and went on to work in wealth management for three large banks. During that time I learned a lot, especially when I was a stockbroker. *

While the Chinese market rallied today and closed up, they are probably in a bear market trend.

Herewith, a summation of the lessons I learned all of which are old Wall Street sayings which are found to be true again and again to the dismay of many investors particularly new ones.

1) “Don’t confuse a bull market with brains.”

2) “Pigs get fat and hogs get slaughtered.”

3) “Buy on rumor, sell on news.”

4) “Trees don’t grow to the sky.”

5) “They don’t ring a bell when it is time to get out.”

Two observations by master observers and investors in the stock market.

Herbert Stein, chief economic adviser to Presidents Nixon and Ford, formulated ‘Stein’s Law’:

“If something cannot go on forever, it will stop.”

And from Sir John Templeton:

“The four most dangerous words in the investment business are, ‘this time its different.'”

 

 

*For those of you from my hometown of Orangeburg, SC, I started working for Henry Sims when I was 16 and worked at his brokerage firm every afternoon when high school let out or when I could sneak out. Originally Henry’s office was on US 301 but he moved to– I can’t remember the name of the street– but it was all of block or two long between Broughton and Middleton Streets, catty corner to old Altman Motors.

When I became a stockbroker in 1987, Shearson spent $100,000 per person to train each one of us and the training took six months. They stopped doing this a long time ago because of the cost. In those days you had to serve a six month apprenticeship with a member firm of the New York Stock Exchange to become a stockbroker.  Our classrooms were on the 106th Floor of Two World Trade, a building I knew well.

At that time, large percentage of people on Wall Street had originally come into the business as stockbrokers with Merrill Lynch–aka MLPF&S–so it was known as “Mother Merrill.”

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Charles McCain

Charles McCain is a Washington DC based freelance journalist and novelist. He is the author of "An Honorable German," a World War Two naval epic. You can read more of his work on his website: http://charlesmccain.com/