How Wall Street has institutionalized mediocrity
If you really want mediocrity, go to a Wall Street financial advisor. It’s not really their fault, we feel sorry for them and what the Street has done to them. But, we would be remiss if we didn’t point out what has happened.
For the most part, all financial advisors are now taught the same way, and the same things, and it’s all part of the evil empire of Wall Street’s ultimate goal. That goal is to keep people’s money under their firm’s management for as long as possible and make fees from it. You see, you and millions of others think that the goal of a financial advisor is to make you money. No no no. You have that wrong. The goal is to keep your money in an account that pays them a fee and no matter how lame the returns are, no matter how pathetic, no matter what – just keep you there paying the fee. This is why you hear them say things like:
“It’s time in the market, not timing the market that matters.” (One of the trite one-liners they teach idiot financial advisors to say to push the mediocrity propaganda.)
“You must diversify, you know, to keep your money safe. Everybody knows you have to be diversified.” (Studies have proven that diversification depresses potential returns and that wealth is often created by concentration, not diversification.)
“Stocks are risky and so you need to have a balanced portfolio.” (This alludes to having 60% stocks and 40% bonds – which we believe is a guarantee for failure or at least mediocrity since bonds lose value when rates go up, and rates will be and are going up!)
“A good return is around 4% to 7% on your money annually.” (This is the propaganda machine at work – keeping your expectations low.)
“You should take a look at putting some of your money into international stocks for further diversification.” (How’s that Asian Tiger fund treating you lately now that China is blowing up its publicly traded companies?)
“We want to take a holistic approach to your investment portfolio.” (This is some woke bullshit that we don’t even know what that means.)
“You must have a financial plan.” (Really? Do I? How about I just make serious returns every year and get richer…how’s that for a plan?)
“Oh, I know your account is down -20%, but hey, the market is down -30% so you’re doing pretty good!” (Really? Are you really trying to make me feel good about losing 20%?)
Again, the goal is simple. Keep the sheep from jumping out of the pen. Tell them things over and over and over again so that they eventually believe it. Things like a 4%-7% return is a good return. Or, “You must diversify” and “You have to let a professional manage your money.”
Then, the financial advisor is told to put the client (YOU) into a diversified portfolio (which guarantees they will likely get that mediocre return and no better) and make sure you use “products” like mutual funds, hedge funds, wrap fee accounts, and other such products that have an “internal fee” that pays Wall Street every year, year in and year out, NO MATTER WHAT THE PERFORMANCE OF THE ACCOUNT IS!
Ignore the fact that when the SHTF everything is correlated and therefore diversification doesn’t work very well, if at all. Ignore the rate increases that are coming and put them into a bond fund that pays them nothing and will likely lose money if rates go up. Ignore the fact that 4% to 7% is a pathetic return. At 4% in order to retire with around $1 million you have to save $18,000 a year for 30 years to get there. Seems like a lot of savings (a lot of people can’t seem to save $18,000 a year what with a family and kids and vacations and taxes!) and a lot of time (30 years) to get to $1 million. $1 million isn’t what it used to be thanks to inflation, but don’t get me started on that topic!
Ahhhh, it’s so beautiful this ATM machine Wall Street has created by dumbing down the sheep and literally pounding the propaganda into them for the last three decades. But it isn’t beautiful for the clients, the investors, the account holders. It’s not beautiful for them.
Instead of making real money the old fashioned way, by buying and selling individual stocks directly, and making strong returns on at least some of their money this tried and true way, they position you for pathetic returns on pathetic mutual funds and other products that are not designed primarily to make you money, but are always designed to make them money whether you make money or LOSE money.
This is a real thing by the way. It’s true. We know, because we were on the Street as this transformation took place, as they laid the propaganda out, as they told us what to say to investors, and as they forced us AWAY from making money for people the old fashioned way, by owning and trading stocks, and tried to (successfully) force us to put people into these “products” they had designed.
Take mutual funds, for example. Like annuities, which are mutual funds sold to you (salesman’s commission) and managed by a money manager (that charges yet another internal fee) wrapped in an insurance wrapper (another fee?) managed by the insurance company (another fee?). How many fees can we take from one person’s investment? That seems to have been the game they’ve been playing for years. The Street makes trading costs, bid/ask spreads, asset management fees at the mutual fund level, a fee to the insurance company perhaps and a sales fee to the salesman (your advisor is the salesman in case you didn’t know) and then maybe some kind of annual account maintenance fee…it seems to go on and on. And you don’t see all the fees – which is also beautiful for them and not for you.
It seems to us that there are some funds that might make a gross return of 5% a year – and after all the fees you will only see 1%. Does that seem right? We don’t think it is, but hey, if you pay off enough politicians and so-called “fines” to the right government agencies and they’ll look the other way. And the ATM machine keeps on paying out day in, day out, regardless of how the clients’ investments perform.
Dutch Masters is the founder of Carnivore Trading, LLC. For more information and a free two-week trial, go to www.CarnivoreTrading.com.