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Observation of the Day: Investment advisors are swarming like bees

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May 12, 2009 – Comments (13) | RELATED TICKERS: BEE

 

While I do blog from time to time here, OK a little more than that, I technically do not work in any field related to investing.  I actually work in the auto industry (insert joke here).  My company has an office in a building that's owned by a major REIT. 

A number of the tenants of my building have not surprisingly run into financial difficulty over the past year and have either gone bankrupt or moved out to less expensive space.  As this was happening I thought to myself "Man, the company that owns our building is screwed.  There's no way that they'll be able to fill all of this empty space."

Boy was I wrong.  New companies are occupying this vacant space at a rapid pace.  I finally wondered to myself today "Who in the heck are all of these new companies and where are they coming from?"  So I did a quick walk around the building and looked at the corporate directory. 

It turns out that just about all of them are some how related to advising others on investing their money or managing money directly.  While I am not in the city, I am within driving distance of Wall Street.  Apparently people who worked on "The Street" are being laid off in droves and they are forming their own companies. 

The names of the new companies in my building looks like a dictionary of buzzwords.  I kid you not, the following is a real list of the names of some of these companies (I've changed them slightly to protect the innocent):

XYZ Capital Management (there is three of these)

XYZ Trading

XYZ Wealth Planning

XYZ Financial Group

XYZ Capital

XYZ Brokerage Services

XYZ Advisory Services

XYZ Risk Management

XYZ Financial Services

XYZ Securities Corp.

The fact that investment advisors are swarming around me like bees has something to do with the part of the country that I'm in, but good grief.  I guess that after beeing...excuse me being...on the street for all these years these guys don't have any other skills, but something's going to have to give. There's not enough money in the world for all of these guys to survive.  I wonder how many of them make it...50% at best?  That's probably very optimistic.

Anyhow, that's my random observation for the day.  The question is what are we going to do with it.  One conclusion that I have been able to draw, and I don't like it either, is that real estate in my area likely has much further to fall.  It was propped up by all of these Wall Street bonus babies for years and now that pool is drying up (not completely, but it's not like it was).

Another conclusion that one can draw is that the shift in power towards banks and Wall Street over the past decade, and the resulting astronomical salaries there, has sucked America's talented people away from real, useful industries. 

Ideally an economy should be based upon producing things that people want to buy...particularly people abroad.  The U.S. consumes a lot, but produces very little in terms of real, tangible things.  Instead of adding value, for years we have been using leverage and financial smoke and mirrors to create the illusion of productivity, spending some of the money that we made from doing so on massages, fancy coffee, and financial advice domestically while sending the bulk of it abroad for tangible goods.  That's part of the reason why we're in the mess that we find ourselves in today.

Don't get me wrong.  Investing is very important and there certainly is a place for investment advisors, I actually find investing and economics fascinating and wouldn't mind becoming more involved in the field some day, but the sector seems to be a little overcrowded.

That's my $0.02

Deej

13 Comments – Post Your Own

#1) On May 12, 2009 at 5:01 PM, PrestonCheek (31.09) wrote:

Thats a good read Deej, being from down south we could use more of the advisors down here. I have often said that more people in the south need to learn to save and invest more, mentioning stocks with my friends normaly gets me the twisted face look among those talking about hunting, fishing or anything else but stocks.

Preston

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#2) On May 12, 2009 at 5:12 PM, portefeuille (99.56) wrote:

Ideally an economy should be based upon producing things that people want to buy...particularly people abroad.  The U.S. consumes a lot, but produces very little in terms of real, tangible things.  Instead of adding value, for years we have been using leverage and financial smoke and mirrors to create the illusion of productivity, spending some of the money that we made from doing so on massages, fancy coffee, and financial advice domestically while sending the bulk of it abroad for tangible goods.  That's part of the reason why we're in the mess that we find ourselves in today.

You like that part, don't you?

Please do not forget science. Mathematicians at universities do not really "produce" much but I would miss their "products" more than the Chrysler automobiles.

 

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#3) On May 12, 2009 at 5:19 PM, dudemonkey (40.73) wrote:

How true.  I went to see Peter Schiff last night at the Mariott in Times Square (did you happen to make that?) and met with a EuroPac advisor afterwards.  I went to see what nuggets of their thinking I could glean and it was interesting that the guy I sat with was a relative n00b (had been there since August) and he commented on the rapid expansion that the company is undergoing.  It sounds like they took over a whole new floor of their building.

Seems like everyone that got burned last year is looking for new financial advice.  

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#4) On May 12, 2009 at 5:36 PM, TDRH (99.76) wrote:

"Another conclusion that one can draw is that the shift in power towards banks and Wall Street over the past decade, and the resulting astronomical salaries there, has sucked America's talented people away from real, useful industries"

 I am sure these peope have talents, but their collective greed ran the companies into the ground?   I am sure Robert Nardelli has talents, but I would not want him to run the company I work for and I am not interesting in having someone of his ilk plan my retirement.

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#5) On May 12, 2009 at 7:57 PM, brwn8484 (89.05) wrote:

The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
John Maynard Keynes

Its intersting that the very people who are running our government have bought into the marxist philosophies of a man who knew that only one man in a million would know why (or how) their freedoms and money were being taken away.  

It's not the finacial crooks I'm concerned about.  Read the final qiote from CS Lewis and you'll know why!

I like bats much better than bureaucrats. I live in the Managerial Age, in a world of "Admin." The greatest evil is not now done in those sordid "dens of crime" that Dickens loved to paint. It is not done even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed, and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voice. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the offices of a thoroughly nasty business concern.



-C.S. Lewis, Screwtape Letters, preface

 

 

 

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#6) On May 12, 2009 at 9:50 PM, devoish (99.07) wrote:

Another conclusion that one can draw is that the shift in power towards banks and Wall Street over the past decade, and the resulting astronomical salaries there, has sucked America's talented people away from real, useful industries.

I have seen that happen myself. It is hard to fight in a culture that judges your worth by your paycheck.

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#7) On May 13, 2009 at 12:38 AM, drummnutt (< 20) wrote:

"The U.S. consumes a lot, but produces very little in terms of real, tangible things.  Instead of adding value, for years we have been using leverage and financial smoke and mirrors to create the illusion of productivity, spending some of the money that we made from doing so on massages, fancy coffee, and financial advice domestically while sending the bulk of it abroad for tangible goods.  That's part of the reason why we're in the mess that we find ourselves in today."

Don't think I could have said it better myself. Good post.

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#8) On May 13, 2009 at 2:30 AM, uclayoda87 (29.51) wrote:

Your post suggest that some of the commercial REITs may be getting a second wind, but it also suggests that they will decline when the current start-up begin to fail.  I would guess that they have cash to run for 6 months to a year, but after that they may be looking for a government bailout.

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#9) On May 13, 2009 at 5:19 AM, oSUNo (51.20) wrote:

Germany (1.4T) China (1.2T) and the US (1.2T) are the three largest exporters in the world, the US isn't miles ahead (infrastructure decline?) for a number of reasons - the changing shape of employment (that you witness above), agricultural technology, Even what might be called "internet inflation" where access to detailed information is a kind of currency that has to find a global "level" in its use which according to google trends remains entertainment as opposed to education, for example, or mass intervention in the political process.

Another example, could we have something like the war in Yugoslavia now, 18 years later?

Maybe.

Would it last four years?

I don't think so.

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#10) On May 13, 2009 at 6:06 AM, TMFDeej (99.46) wrote:

Hey dudemonkey.  I'm not a big fan of Schiff.  Even though he was right about some things, he was wrong about the big one.  He gave many of his clients TERRIBLE investment advice. Despite this fact, he still acts like he's king of the world. 

I can understand why someone who was mocked and called an alarmist when predicting this mess would have a chip on their shoulder and say "I told you so." now, but in the end it doesn't matter if you see the huge storm coming if the people who followed your investment advise lost money along side everyone else.

Deej

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#11) On May 13, 2009 at 6:13 AM, TMFDeej (99.46) wrote:

TDRH.  I'm not saying that these aren't intelligent people, just that there's too many of them in this line of work in America and not enough in things like engineering, science, math, etc... 

Even high quality teachers that help us build a base of intelligent children to build off of in the future would have more value for America than some of these companies like the quant and formula trading groups that try to skim pennies here and pennies there off of the market and add no real value to anything but their own bank accounts.

As far as Nardelli goes, in my book he's a huge failure.  He may be a good manager, I'm not sure who it was...possibly Jack Welsh...said that he was an amazing in that role at GE, but he has proven to be an absolutely terrible CEO twice.  Sure not even Henry Ford in his prime could have saved Chrysler, but still.  Besides Nardelli seems like a real Johnson.  If you're going to act like a diock to everyone on the way up, I don't mind seeing you fall down.

Deej

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#12) On May 13, 2009 at 10:25 AM, OleDrippy (35.19) wrote:

I am a financial advisor and I'm leaving the business for the following reasons:1. Cold calling? Puh-leeze..2. Selling something I have virtually no control over3. Compliance, compliance, compliance4. Tiniest of marginsI came into this business wanting to help people and make a little money doing it. The problem is this business is not filled with competent investment professionals; it is filled with GREAT salesmen who will convince you THEY know what they are talking about. So people are mad and leaving their current advisors, I have news for you; pretty much EVERY advisor is losing current clients. They just hope to gain as many or more than they lose and the game of "move the money around" continues.I really wanted to be successful in this industry because I do feel there is a place for financial advisors and they can do a lot of good for people. Cold calling, schmoozing, sell, sell, selling is the reason 9 out of 10 of us are no longer in the industry within 4 years. It just sucks. 

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#13) On May 13, 2009 at 4:12 PM, dbjella (< 20) wrote:

The U.S. consumes a lot, but produces very little in terms of real, tangible things.  Instead of adding value, for years we have been using leverage and financial smoke and mirrors to create the illusion of productivity, spending some of the money that we made from doing so on massages, fancy coffee, and financial advice domestically while sending the bulk of it abroad for tangible goods.  That's part of the reason why we're in the mess that we find ourselves in today."

Deej, what are people going to do in 20 or 30 yrs when machines, most likely, will make a bulk of everything in this world?  Won't all nations be in a similar boat to that of the US?  Oh sure we will still have some labor jobs, but I think the bulk of the people will have to perform some type of service.... 

It seems to me that if a country does not allow its workforce to produce at a wage acceptable to a world market or a countries workers demand a wage that exceeds a world market then a company finds a new source of labor (moves to cheaper labor).  Eventually, a machine will be made that will do the same job more efficiently and cheaper.  Then what?  Service job.  Just my opinion.

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