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4 Lessons From A Life On Wall Street

Tyler Durden's picture




 

In 20+ years of life on Wall Street, ConvergEx's Nick Colas has had four mentors who helped him make sense of the business.  Some were very hands-on, and others taught more by example.  In an intriguing note, Nick explains the four key lessons he learned from them.  The single most useful lesson, especially for a brokerage analyst: “Message plus repetition equal franchise.”  Other sayings that have stuck with Nick are “If you want and answer, you need to ask a question” and “do things the way you want to do them.”  While simple to say, behind those simple aphorisms sit much richer messages.

 
Via ConvergEx's Nick Colas,

Stuff My Mentors Have Told Me

The culture of Wall Street, for all its gloss of mathematical sophistication and notions of high finance, has more in common with a primitive tribe than a supposedly more advanced civilization.  The common characteristic is a strict adherence to an oral tradition.  You can read every book dedicated to investing and still be clueless about how to actually make money in the market.  There is no Wiki entry for how to trade stocks or bonds or commodities that will make you consistently profitable.  And forget trying to figure out how to be a productive investment banker by downloading a bunch of books on your Kindle.

Life in and around the Street comes down to storytelling: how to tell your own and interpret the narratives others impart to you.  For all the commentary that “It’s a young person’s game” the truth is that the grey muzzles tend to have a leg up on the pups. As one veteran analyst told me when I started in the business, “Old age and treachery beats youth and exuberance every time”. Granted, you have to be open to learning even after the AARP starts sending you junk mail.  But at least you should be past the rookie mistakes by that point.

I have had four people I consider mentors in the business since I started working summers in a mutual fund mailroom in 1984.  One was a salesperson, two were sell-side analysts, and one still manages money.  My involvement with them declines as my career progressed, but there’s no way I would be writing these pieces on a daily basis without the lessons learned at their side.

Mentoring has, of course, become institutionalized on Wall Street in the last two decades.  Large companies assign senior people to incoming young employees in the hopes that the “Firm of tomorrow” learns from the “firm of today”.  It’s all little bit like those mass weddings the Reverend Sun Myung Moon used perform in sports stadiums.  Total strangers can connect and create a relationship, to be sure.  But it usually works better when individuals find each other, connect at some level, and build a personal connection.

The following are a few lessons I learned from people who took an interest in my career and progress, not because they were mandated to help, but because they wanted to push me along.

Lesson #1 – “If you want an answer, you need to ask a question.”  When I worked in midtown Manhattan before heading off to business school, my mentor/boss had an office facing the construction site for a new hotel.  Every Monday we’d notice that the crane used to lift materials to the top floor had mysteriously risen by 20-30 feet to accommodate the every-growing building.  We pondered how this happened.  I had one theory, my boss another, and other co-workers chimed in with varying hypotheses.  This was long before the Internet, mind you.  There was no way to Google or Youtube an answer.

 

On my birthday, my boss said she was taking me out for lunch, but first we had a stop to make.  We walked up to the building site, where she had arranged the foreman to explain how the crane went up every Saturday morning.  It had something to do with hydraulic jacks, extra trusses and the need for a calm, not too windy day.  Mystery solved, and lesson that all you need to find an answer is to ask the right person.

 

Lesson #2 – “Do things the way you want to do them.”  My first contact with Wall Street research was a long-time and highly successful Consumer Products analyst at a summer intern stint during business school.  She had been on the first Institutional Investor list of top analysts and held her position for +15 years.  Everyone from senior traders to investment bankers to the firm’s top clients held her in high regard.  And, fortunately, she took enough of an interest in me that she was remarkably candid about everything.

 

As I watched her work, I realized that she didn’t use a computer for anything.  Granted, this was in 1990, and Wang word processors with 8 inch floppy disks were cutting edge technology.  To write a note, she would sit down with a legal sized yellow pad and start with a summary and then long hand her entire report.  For an earnings model, she would tape a column of paper to her last printed report and work every line of the financial statements by hand.

 

I asked her once why she didn’t use a computer for any of this.  “It is much faster,” I explained.  She pointed to the wall in her office that displayed the plaques you used to get when you made the II “Top analysts” list.  She wasn’t about to change anything in her workflow just for the sake of change.  Her method worked for her, and she continued to rank highly versus her competition until she retired many years later.

 

Lesson #3 – “Message plus repetition equals franchise.”  The single most influential person in my career was a Machinery sector analyst who helped me when I got to my first senior analyst position after grad school.  He, like my summer time boss/mentor, has been an II ranked analyst ever since the 1970s.  He was way ahead of his time, hosting events for industry experts and doing global demand surveys long before such things became Wall Street’s stock in trade. 

 

His edge wasn’t just doing the fundamental work to add value; he was a master of packaging and repackaging his investment viewpoints.  If he did a 100-page report on John Deere, he would find 10 different reasons to call clients and appear on the firm’s morning call to highlight different themes from the same King James Bible sized tome he had produced. 

 

“Even if you have good ideas,” he told me, “no-one has time to remember how smart you are.”  If you want to build a name on Wall Street, you have to repeat, repeat, repeat.  That stuck with me, and it is the central reason the ConvergEx note comes to you every day, +200 days a year. 

 

Lesson #4 – “There is always a reason.  Someone knows it.  Make sure it is you.”  The last person that heavily influenced my view of Wall Street and investing runs a large hedge fund.  I was with him when it was much smaller, so I got to watch and learn and (occasionally) pick up a bit of wisdom. 

 

Unless you’ve worked at a trading-oriented hedge fund, it is hard to understand just how different this approach to allocating capital is from other popular paradigms.  Anything that is based on simple math – P/E ratios, economic data of any sort, etc. – is deemed to be “Already in the stock” and essentially worthless.  You need to know it, but it isn’t any part of an investment case.  Instead, you need to have your own separate channels of information that develop a different view of the investment than the mainstream.  And, of course, it needs to be legal. 

 

When a stock is up 5% in a down market on no discernable news, most investors will shrug and say something clever like “Must be more buyers than sellers.”  That will get you fired at many hedge funds.  Your job is to know.  The hedgie’s mantra, rightly or wrongly, is that there is always a reason for an anomalous move in a security.  If you don’t know it, go find it.  Or your boss will fire you and hire the guy/gal who does.

That’s a harsh message on which to end this note, but it feels oddly appropriate.  Good mentors act as guides to the business, but the journey isn’t easy for anyone.  The best they can do is point out a few hazards and perhaps a shortcut or two.  The rest is up to you. 

 

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Thu, 07/04/2013 - 15:25 | 3721836 AssFire
AssFire's picture

Lesson #5

"How I learned to love Quantitative Easing"

It is our best hope for the end of DC:

The BRICS nations are not sitting idly by allowing Washington carte blanche access to the world. They have been very quietly forging alliances all over the planet. It is only a matter of time until there is a pivot point and the nations of the world pledge their allegiance to the new world currency.

Shortly after that, Washington will be over. I didn’t say America would be over…just DC, then it will be up to the states to regain their sovereignty and act like the nations they USED TO BE.

Pray for the day to arrive soon. Because when the dollar collapses, perhaps some states of the Union will find their backbones and balls and SECEDE.

Secession is the only possible solution for individual liberty and property rights in the Americas.

Thu, 07/04/2013 - 15:54 | 3721910 ZerOhead
ZerOhead's picture

Lesson #6

Your future career will be shorter than you expect. Learn to eat bugs...

Thu, 07/04/2013 - 16:00 | 3721922 francis_sawyer
francis_sawyer's picture

Lesson #6a

~~~

Quit your useless ass job & do something productive & useful for a fucking change...

Thu, 07/04/2013 - 16:15 | 3721944 otto skorzeny
otto skorzeny's picture

Some day this whole fucking stock market charade will be looked back at as we now look upon the "Tulip Mania"- a Ponzi scheme and massive inappropriation of capital where everyone tries not to be the one left holding the bag. I hope it's soon-the suspense is killing me.

Thu, 07/04/2013 - 16:50 | 3721997 AssFire
AssFire's picture

Otto, Take it to the next level...Since 2008, I have been hoping for it all to crash; enjoying down days with the hope that it would continue. To focus on the fake casino market will drive you nuts.

Now, I rejoice each month as Dr. Benanklove pumps moar and moar into ever diminishing bubbles. Knowing that a crash is only a crash to be pumped back up; set your sites on total dollar collapse- get p/m, fuck the market and learn to love QE.

Thu, 07/04/2013 - 17:00 | 3722018 otto skorzeny
otto skorzeny's picture

actually I have been focusing on getting in shape physically and sitting on the sidelines investment-wise but I am  bemused by the insanity of Shalom's efforts as I realized long ago that the problems of 2008 were never resolved and are even worse now.

Thu, 07/04/2013 - 18:16 | 3722151 max2205
max2205's picture

Get a fast hft algo and dont stop

Thu, 07/04/2013 - 18:56 | 3722218 AldousHuxley
AldousHuxley's picture

lesson #1.....be born rich

lesson #2.....marry rich

lesson #3.....get lucky and get rich

lesson #4.....hope your parents get rich by the time you turn 21

lesson #5.....steal from the rich

lesson #6.....everyone else can be bought including ivy league lawyer/mba slaves to work 12hours/day in exchange of 600sqft efficiency apartment.

Thu, 07/04/2013 - 16:05 | 3721929 spine001
spine001's picture

Your analysis is missingna critical detail. Look at what happened to Evo Morales plane when the EU Countries thought that hebwas carrying Snowden? The guy that should have been perceived as helping them? Without hesitation they proceded to kidnap him. What can you conclude from that fact? Did Snowden uncover what we already knew about being spid upon or something much, much bigger. Digest that and then think again about DC.

Thu, 07/04/2013 - 16:32 | 3721971 ZerOhead
ZerOhead's picture

It was an eyeopening and jawdropping act to be sure...

Thu, 07/04/2013 - 17:41 | 3722097 reload
reload's picture

EU / NATO counties are easy for the US to bully.

Cameron (uk) and most of the EU 'leaders' are keen to sign a new EU/US trade agreement to unveil as a great success and enabler of progress...so they are in even more servile mode than ever.

Yesterday the Times newspaper ( published in London by Murdoch) ran a leader calling for Snowdon to go back to the US and stand trial because the US had by far the most able and effective judiciary, he would be assured fair treatment. They hailed the wisdom of 'world leaders withholding asylum' rejoicing in the proof that the world hates traitors.

The BBC spewed it forth relentlessly all morning. I was fucking amazed, even for the crony UK media it was disgusting. 

Thu, 07/04/2013 - 15:24 | 3721845 Crash Overide
Crash Overide's picture

#5 Gold and Silver = money?

Thu, 07/04/2013 - 16:11 | 3721939 JuliaS
JuliaS's picture

You're fired!

Thu, 07/04/2013 - 15:26 | 3721849 Bay of Pigs
Bay of Pigs's picture

Wall Street? I look forward to the day it resembles a financial smoldering crater with no influence whatsoever.

Thu, 07/04/2013 - 15:29 | 3721857 impermanence
impermanence's picture

Wall Street = the ultimate something for nothing scam.

 

Nothing more need be said.

Thu, 07/04/2013 - 15:29 | 3721858 Crash Overide
Crash Overide's picture

#6 Information is worth more than...?

Thu, 07/04/2013 - 15:46 | 3721894 The Invisible Foot
The Invisible Foot's picture

We got whats coming to us.

Thu, 07/04/2013 - 15:49 | 3721899 Pimp Juice
Pimp Juice's picture

#5 Buy low, sell high - but don't take a drug test.

Thu, 07/04/2013 - 15:57 | 3721907 ZerOhead
ZerOhead's picture

Lesson #5

Don't forget to spread some of that love to the politicians and regulators...

Thu, 07/04/2013 - 15:55 | 3721911 Cold Grub
Cold Grub's picture

Shit rolls down hill......or it should eventually .

Thu, 07/04/2013 - 16:09 | 3721935 Ghordius
Ghordius's picture

last point just makes me think again "hedgefunds are one of the greatest frauds ever committed"

Sat, 07/06/2013 - 18:44 | 3727035 mkkby
mkkby's picture

Agreed --“There is always a reason.  Someone knows it.  Make sure it is you.”

The insiders won't tell anyone they don't know well, so you can safely make up a good sounding reason and get away with it.  Yes, hedge funds are just a marketing scam.  Most are just market performers.

Thu, 07/04/2013 - 16:10 | 3721938 otto skorzeny
otto skorzeny's picture

Wall Street is a fucking "tribe" all right.

Thu, 07/04/2013 - 19:28 | 3722286 bluskyes
bluskyes's picture

Is that you Arch?

Thu, 07/04/2013 - 16:18 | 3721954 Goldilocks
Goldilocks's picture

Drop It Like It's Hot by Snoop Dogg ft. Pharrell | Interscope
http://www.youtube.com/watch?v=RaCodgL9cvk (4:35)

Thu, 07/04/2013 - 17:42 | 3722000 QQQBall
QQQBall's picture

deleted

Thu, 07/04/2013 - 17:44 | 3722102 Alternative
Alternative's picture

Lesson #10 - Quality work is best job security

 

Maybe it was in 30ies. These days that is just an invitation for incompetents to stab you in the back. 

Thu, 07/04/2013 - 17:14 | 3722046 Tinky
Tinky's picture

Lesson #11 – When cash flow stagnates, head out to Aqueduct or Belmont and appeal to the valet parking guy for some help with the pick-four.

Thu, 07/04/2013 - 22:43 | 3722656 Godisanhftbot
Godisanhftbot's picture

Piker, why not for for the whole enchilada, the pick 6 , but for that you need to consult the mens room attendant.

Thu, 07/04/2013 - 17:36 | 3722087 Dr.Engineer
Dr.Engineer's picture

Lesson #0:  Figure out what principles you are willing to die for because that is what will be your legacy.

Thu, 07/04/2013 - 19:15 | 3722263 luna_man
luna_man's picture

 

 

"Good mentors act as guides to the business"...

 

MY MAIN MAN, take a bow!  talkin bout you!!

 

 

Thu, 07/04/2013 - 20:30 | 3722462 LongBallsShortBrains
LongBallsShortBrains's picture

#1. Cut losses
#2 cut losses
#3 cut losses

Fri, 07/05/2013 - 04:26 | 3722902 All Risk No Reward
All Risk No Reward's picture

Lesson 0: Don't ever talk to society about the debt based money fraud Wall Street pushes on society that will bankrupt them by design.  In fact, don't ever ask about it and pretend you don't know you are playing your role in destroying America and freedom across the globe through a vehicle based on 3rd grade math.

Riddle me this Bankman...

If a bankster lends society $20 @5% interest, society owes the bankster $21 in one year's time because of a bookkeeping adjustment that adds $1 interest liability to society and $1 interest asset to the bankster.

If society only was given $20, how can society pay back $21?

Oh, and don't say the banksters will share their $1 in earned interest as they steal all the money from society nailed down or not.

A bailout is when the banksters issue $20 in debt to society, but keep the $20 for themselves 9or their front company).  Society receives $0 and owes $21.

"All war is deception"
~Sun Tzu, Art of War

Indeed.

And you, sir are manning the debt based Trojan Horse that powers all the evil we see around us...  from 10s of millions of people starving to death, to endless wars, to CIA jackal assassins to drones, to GMO pesticide foods, to the loss of liberties, to a government that claims the right to assassinate anyone they want, no trial, no jury, no nothing, slaves.

Debt Money Tyranny (in graphic, money flow form)
http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

Weapons of Mass Debt (100% absolute proof the Federal Reserve is a black letter law criminal organization)
http://www.keepandshare.com/doc/3324744/wmdebt-graph-3-79k?tr=77

Fri, 07/05/2013 - 06:33 | 3722917 Disenchanted
Disenchanted's picture

re: "The culture of Wall Street...has more in common with a primitive tribe"

Indeed. However here @ ZH, Swiss law prohibits us from mentioning which tribe...

Do NOT follow this link or you will be banned from the site!