Exact Spot Where The First Million-Share Block Of IBM Traded On The NYSE
My idiot classmate was standing on the very spot where we’d been told that a single order of a million shares of International Business Machine had traded earlier that week. He was pretending to be awed and humbled by the powerful, once-in-a-lifetime vibe, but we could tell he was faking it.
We were on the floor of the New York Stock Exchange, a first for all of us out-of-towners in this brokerage training class and, one by one, we took turns standing on the very spot where a million-share block of IBM had “changed hands” as they used to put it. A massive bank of computer screens and telephones more or less marked the location.
This was back in the day when anyone still cared about IBM or about million share blocks of stock – a quaint period not too long ago just before the Amazing Tech Stocks of the New Millennial Age algorithmed their data-driven way onto the investment dance floor.
“John, your turn,” said the training class instructor as he pointed to the place on the wooden floor where I could stand and experience the wonder and the beauty of capitalism’s most fevered moment. So, like a true rube gawking at tourist highlights of the Big Apple, I walked over and stood there for a moment and felt the nothing that was there or not there and then moved off so the next young trainee could receive the sacred initiation.
It was late in the day, well after the close of trading and a few of the floor traders still around, all male and middle-aged, were blatantly ogling the 3 or 4 women in our class and emitting rude whistles and smacking sounds. I noticed a janitor sweeping paper off the floor and then we were hustled back out of the building and onto the streets for the walk back to headquarters several blocks away.
Hitting the pavement, I considered the situation: I had a couple of bucks in my pocket and a few dollars in the bank from the tiny paycheck the brokerage house provided new trainees. Someday I would be paid on my ability to make sure stock shares changed hands and commissions piled up. I didn’t know if I was up to it but I wanted to find out all I could about how the whole thing worked – shares of companies traded based on what? I’d figured the best way to get a handle on it would be to place myself in the middle of the process and watch. If I got rich, that’d be just fine and if I didn’t get rich, nothing material had really changed.
We trained in the World Trade Center number 10 building: our classroom was on the first floor and the rest of the company had offices on higher floors. The first thing I notices about the class was how sales-oriented it was. The manager who had hired me back in Denver had said, “Now, John, this is a sales job” but I hadn’t realized that’s all it was.
They were only interested in selling lots of products and each day we listened sleepily to the head of one department or other describing how to present their investment product to those at the other end of the telephone.
I learned everything I know about cold calling from a legendary old sales guy who’d made a fortune from cold calling customers – convincing them on the phone to buy — and now taught others how to practice the art. His lectures were never more than 45 minutes at once because he had to step outside at that point to smoke a Pall Mall. “This guy is right out of the 1950s,” is what the woman trainee sitting next to me said after he’d recommended that any men with beards should shave them and make sure their shoes are always polished.
We wondered if he’d ever listened to rock and roll music or if he’d somehow missed it because of too many hours on the phone harassing prospects about mostly worthless initial public offerings – the ones that paid the most commissions. We guessed that those were the ones he’d worked the hardest.
The stellar achievers of selling financial things presented themselves one by one over our 30 days of training in the heart of New York City and we took notes.
Various experts from the firm would be introduced and we would listen to them and take more notes.
A technical analyst explained how reading stock charts worked. If the price on the graph was going up, that was a good sign and if it was going down, you might want to avoid that one. If volume picked up on new highs, that was good. If not, “caution might be warranted” was the language.
The Chief Executive Officer of Dean Witter dropped by for a short speech in which he encouraged us to work hard and succeed. He wore the best looking, most expensive suit I had seen in New York and was accompanied by 2 assistants of the opposite sex who carried his briefcase and opened doors for him.
The main thing that the CEO had to tell us was that as brokers we were doing customers an enormous favor by offering expert advice on the most important and crucial subject in America: money.
Next up was the Vice President in charge of the company’s recommended list – those stocks considered “buys” by a committee of mostly Dartmouth business school graduates. They were careful to select large industrial brand names that prospects would be able to identify. There were no IPO’s on the list.
After he went over it, he took a few questions, one of which, from a known smart aleck in the back of the class, was “Isn’t it the case that half of these on the recommended list are there because they do regular investment banking activity with the firm?”
To which, the VP answered, calmly and evenly and as if it were no big deal and he’d practiced it, “Of course. Those are the businesses we’re close to, so we know them well. Next question.”
I had begun to observe this quality among those working in the New York headquarters: no matter what you asked them, they had confident answers ready to go that explained everything for sure, next question. It was impressive and annoying all at the same time.
Their municipal bond executive had the best advice I heard. He said that if you cold call on municipal bonds and the person on the other end even knows what you’re talking about, that means they have a lot of money. Muni bond buyers looking for tax-free income must already have substantial accounts somewhere. “If you call them and they don’t know what you’re talking about when you mention the words ‘municipal bond,’ move on to the next call,” he recommended and later, months later, I discovered the truth of this.
The options trading executive kept his talk mostly on the appeal of covered call writing – a relatively simple concept that requires much less thinking than you’d need for other far more complex options trading schemes and which has the advantage of generating slightly better, regular commissions than selling just stock shares.
You bought shares of stock and sold the right for someone else to buy them at a higher price – to explain it to clients, the firm had pre-printed forms to fill out with all the math easy to complete and demonstrate. It took a while to comprehend, but once you got it, it made sense in a demented squeeze out another commission kind of way.
Our training manager spent one morning explained the importance of focusing in on what he called “a love stock.” “You have to have one stock that you’ve fallen in love with. You’ll need to do research and talk to our analysts, but be sure to come up with your love stock. That’s the love stock that you’ll know thoroughly and call prospects with and be successful. But you must have at least one love stock”
Out in the hallway after lunch I mentioned the idea of a “love stock” to the firm’s chief technical analyst and he laughed and shook his head and said “That is the sickest, most perverted thing I’ve heard today.”
One day a mutual fund guy came in to address the class about the importance of diversification. “You’re doing your clients a favor, a big favor, by keeping them diversified in a portfolio of many different stocks, managed by a professional,” he told us.
Out in the hallway again, during a break, I told the technical analyst what I had learned about the importance of diversification and he looked at me and put his hand on my shoulder and said, “Kid, the purpose of diversification is to force investors into owning what they don’t want or need to own.”
It was good to hear many different opinions during the training process.
At dinner one night with some of my fellow training program classmates, a wide variety of opinion existed among them about which stock would qualify as their personal “love” stock. Each one at the table had a different idea for their choice and a different way of approaching how to pick one.
Some of them boasted business degrees, some were admitted into the training because of their strong sales backgrounds and some (like me) were there only because they were white, male, looked okay in a suit and tie and might be able to adequately explain what a dividend was.
“I like my home state’s utility company,” said a trainee from the Midwest. “They’ve been around since the 20’s, they always make money and they pay a dividend. And everybody in town already knows them from the monthly bills.”
“That’s gonna be my love stock when I start calling,” he said.
A trainee from California disagreed.
“I don’t know about mentioning a company that sends them a bill every month,” he said. “Might be some hostility, I don’t know. I mean, for a love stock.”
“I like these home builders. Haven’t picked one out yet, but I’m working on it. Folks like homes – everybody wants to buy one, live in one. Highly relatable, I think.”
The conversation would go on like this until we were too inebriated to continue it thoughtfully, but everyone class was now thinking about zeroing in on that one stock that could be loved and sold.
Back in my cheap rented downtown Manhattan room where the cockroaches only showed up in the middle of the night, I bedded down and thought about how scary it was that I would be telling others that a stock I picked was worth spending their money on – representing a company that rationalized its own conflicts of interest on the recommended list.
Fortunately, I was in the training program of a respected firm, a program designed to educate me on the subject, right? This seemed different, though, from whatever scene it was that I’d expected –my view of it had been shaped, I guess, from watching Wall Street Week as a kid. On that show which ran for years on PBS, a wise-looking Louis Rukeyser would sit down with wise-sounding guests from the New York investment community and talk about business, economics and stocks. It was the first time I’d ever heard a panelist make a distinction between fundamental analysis and technical analysis.
Rukeyser had what he called an “Elves Index” that was said to measure bullishness or bearishness. And an analyst named Martin Zweig seemed different than the other panelists in that he would reference charts and price patterns and volume indicators. Other panelists often referred to Warren Buffett “out in Omaha” and the concept of “value investing.”
It seemed like a club where long-time friends and associates would gather and discuss the week’s events from the standpoint of wealth and comfort – a much different view of America than I was seeing on the news programs of the era.
The discussions always seemed so relaxed – apparently you could sit around in nice chairs with others and talk about the stock market on a Friday night. It looked as if Louis Rukeyser and his friends were having a great time advising clients wisely on the benefits of this over that.
As I woke up in the middle of the night and heard the cockroaches scattering on the floor, I realized that I was looking for that quality and finding it lacking in the real world many years later just down the street from Wall Street. This is the level of my naivete at the beginning stage of my career picking stocks to sell to customers and getting paid for it.
Between lectures one day out in the hallways at the World Trade Center, I located the technical analyst I’ve mentioned and told him about the difference between what I’d seen on television and what it was like here in the city.
“Kid,” he said, “You’re just growing up. Happens to everyone. Here’s the thing: over the long run, you want to take care of the clients that you find. You might miss an IPO commission now and then, but you want to look after the long term, otherwise, it’ll be tempting to just come in and sell high-commission shit every day and then you’re just a hack. If you can learn to pick good stocks in good businesses and put up with all of the rest of the bullshit, you’ll be doing yourself and your customers a big favor.”
At the end of my 30 days in the New York City training program, they sent me back to the Denver office and sat me at a desk with a telephone. I would get one of the tiny offices once I began producing commissions. The manager recommended that I begin calling on a certificate of deposit unit trust that was paying a 12% dividend. They consisted of a fixed portfolio of 6-month bank CD’s that lasted for six months. And, yeah, that’s what bank CD’s were paying back then.
“What about picking stocks and presenting those ideas,” I asked him.
“Look,” he said, “just open accounts with these and you can approach them with stocks later. The main thing here for you right now is just to open accounts. Put stocks on the back burner for now.”
It was almost funny. The whole idea was to become a stock broker and when I finally sat down to launch the career, the firm didn’t want me to sell stocks. I was peddling units of assorted short-term bank CD’s.
So, I called most mornings and then spent afternoons plotting how to learn more about the stocks that I was GOING to be recommending when I’d been there for a while. I thought about asking questions but all of the other brokers were highly focused on selling things and had no time for the rookie.
I began to realize that if I wanted to learn about actual stock picking that I would have to do it by myself. The firm asked that we stick to their pre-approved list but that seemed to be a compromised mix of well-known names and the not so well-known investment banking clients of the company.
The stock broker sales training was over. Now – at home, at night, and on the weekends, I was learning about picking stocks on my own without reference to anyone’s sleazy recommended list. A book by Warren Buffett’s mentor Benjamin Graham helped and so did one by that Wall Street Week elf Martin Zweig. At some point, it wasn’t even about selling, generating commissions, getting rich or proving anything. I just wanted to see what the secret was or if there was one.