Before I start I would just like to bring back a happy memory from this day on Wall Street.
When I first started on the trading floor of the New York Stock Exchange back in 1981, I believe average volume was about 43 million shares a day. People were making money back then because roughly 90% of the trades were handled by brokers on the floor. Electronic trading was a thing but hardly and for floor brokers, that was a great thing. Commission rates were low compared to pre May Day rates but they were sufficient to provide a great livelihood for the 1366 brokers that worked on the floor.
Before I go on, I think I have to explain what “May Day” represents. It was legislation that was passed sometime in the late ‘70’s. Prior to that legislation, brokers on the trading floor charged set fees based on stock price and amount of shares executed. For example; If you bought 100 shares of IBM at a price of $125 your commission would be roughly $45. If you bought 1,000 shares of GE at $60 the commission would be $110. However, if you bought 1,000 shares of IBM at $125 your commission would be $215. I know, it makes little sense but this commission chart was set up in the ‘30’s I believe and because the NYSE had a monopoly on trading in many issues, they felt there wasn’t any need to change it.
Anyway, back to my story. I started on the trading floor as a QT clerk. The QT stood for Questioned Trade and it basically was a form that was printed out by the clearing houses when trades did not match. For instance; If Broker A bought 1,000 shares of Ford at 25 1/2 and broker B knows selling those shares to Broker A at 25 5/8 there would be a thing called a “Break”. These breaks were then printed out and given to QT clerks to adjudicate the problem. Hundreds and hundreds of these QT’s were created each day and there was a whole back office of people trying to fix them. With the amount of trades being done manually in the 80’s it was amazing that there were only a few hundred of these breaks each day.
So, I worked for a company that was owned by two competing brokerage houses, Wertheim and Lehman Brothers. They generally combined to do about 10% of the business on the floor and I learned a ton but the work was never overwhelming. Summers were incredibly slow and certain holidays were very slow as well. One of those holidays was Columbus Day (uh oh, I mentioned Columbus, am I in trouble). It just so happened that Columbus Day in 1981 was the busiest trading day in history up until that point when over 85 million shares changed hands. I don’t recall the explanation but what I do recall is that from that day on volume records were broken pretty much weekly and that began one of the greatest eras of prosperity on the trading floor in history.
I was very fortunate to have spent my career on the trading floor, working with some of the greatest men and women of that generation. I have more stories than I can even remember and all of them were good.
One last story which revolves around Columbus Day (Now Im a gonner) is a tradition that few people have ever heard of. On this day, the City of New York closes down Broadway from probably Fulton Street to the Battery. It become an Italian street festival where you can buy Zeppolas and canollis and that Italian staple Sausage and Pepper heroes. They can knock down the statues and they can rename the day but today will always be Columbus Day for me and millions of Italians around the country.
Whew, thats off my chest.
It is amazing that as the liberal press and progressives fight for the end of fossil fuels and the complete change over to an electric world we see companies like Exxon Mobil posting incredible profits. Exxon is treated like a pariah by the ESG crowd and it’s stock price reflects it to some extent but this company does one thing better than pretty much anyone else, it makes money. They are investing heavily in renewable energy but let’s be real for a second, they produce oil and it’s components.
Let’s go back to investing 101 for a second. You invest because you want to put your money to work growing at a rate that will be hopefully higher than the inflation rate. Recently, that has been a challenge since inflation has perked it’s ugly little head up and challenged investors to find a asset that will continue to increase in value at a higher rate. Stocks typically do fine in an inflationary period because revenues increase and profits can increase but the lessor known side benefit of this inflationary cycle can be that weaker competitors fail and stronger companies with better balance sheets will prosper even more. It’s just business.
Those weaker companies tend to get gobbled up when it doesn’t present itself as an antitrust issue and the rich get richer.
I have zero problem with this part of the cycle, it has been going on for decades and what ends up happening is companies become stronger, better financed and shareholders benefit.
That is capitalism. Inflation is part of capitalism and it continues to function pretty well.
The point I am trying to make is that companies like Exxon and Chevron may not be the darlings of the investment World but they are solid companies that perform a vital function in our economic ecosystem and the more these liberal ignorati deem them evil, the cheaper they become and the better investments they become.
When the whole concept of ESG investing came out years ago, I predicted it would be doomed. Larry Fink at Blackrock made headlines with this BS and liberal university endowments were pressured to drop companies out of their portfolios because they didn’t fit the mandates of this ESG posse.
Many colleges made a big show of it and their returns suffered. They have smartly went around those mandates and invested in third party alternative investments that have similar exposures to what the endowments had prior, their returns have been excellent since this work around.
At the end of the day, CIO’s know that to have competitive returns for their owners, they need to be invested where money is being made.
It all comes down to this: You invest in companies that are going to make money because at the end of the day you and your family will benefit.
That is the best investment advice I can give.
Excellent advise! Thank You for the trading floor history lesson. Like you said, you have a treasure trove of them. Possibly thoughts of a future book.......