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Where are all the Customer's Yachts?

Updated on August 15, 2014

A Classic Finance Book

The current economic mess we find ourselves in reminded me of the old joke about a visitor to New York who admired the yachts that the bankers and brokers had in the marina. He then asked where the customers' yachts were. Of course, there were no customers' yachts. This joke dates from the 1920s and was also the title of a classic finance book written in 1940.

The joke works just as well now as it did back then which is a sad reminder that although we have known that we are being ripped-off for generations, we seem to be powerless to stop it continuing. The banks and financial services industry take outrageous fees that are often opaque or hidden from the investors and make a fortune even when they are losing their customers' money.

An interesting statistic is that Warren Buffett (The best investor and second richest man in the world) could have turned $1,000 into $4.3 Million if you could have invested in his Berkshire Hathaway fund when he started (in the 1950s) If however he had been a Hedge Fund manager he would have taken $4 Million in fees leaving you with just $300,000. That's the difference between the Haves and Have Yachts.

Disclaimer: Information in this and other linked articles is unregulated and for general information only and is not intended to be relied upon in making specific investment decisions. Appropriate independent advice should be obtained before making any such decision.

Where Are the Customers' Yachts?

or A Good Hard Look at Wall Street

A Classic Finance Book - Where Are The Customers' Yachts?

Where Are the Customers' Yachts: or A Good Hard Look at Wall Street, by Fred Schwed Jr. and published by Wiley Investment Classics. This is one of the classic finance books and still makes sense today.

The author, Fred Schwed Jr., spent just two years on Wall Street in the 1920s, before deciding to leave, in which time he learned a lot about the motivation of the people who work there. The book was written in 1940 after the terrible depression and bear market years of 1929-1940 and recounts many well known classic investment stories, in an amusing style. This is one of the funniest books about Wall Street, but with a serious message.

Fred Schwed's father lost all of his money to a short-seller in the 1920s, but the book is not all about the futility of investment, but how the well-paid "Masters of the Universe" who promise so much do not enrich the customers, just themselves. He was, after all a stock broker who enjoyed the finer things in life and was expelled from Princeton for "entertaining a lady in his room after 6pm".

The author Fred Schwed should not be confused with "Fred the Shred" (Sir Fred Goodwin) - one of the most hated people in the UK - The ex-CEO of the Royal Bank of Scotland who brought the bank to its knees causing it to need to be bailed out by the British tax-payers and who received huge bonuses and salaries AND a knighthood!

Where Are The Customer's Yachts?
Where Are The Customer's Yachts?

Why is the book still so relevant?

You have to laugh (or you would cry)

The author Fred Schwed Jr. updated the book Where Are the Customers' Yachts: or A Good Hard Look at Wall Street in 1955 during the 1950s bull market, with a new introduction in which he explained that the book did not need updating.

A lot of people want to get rich by investing in stocks, but the majority of people under-perform the market. This includes the professional investors who claim to make the best use of their customers' money and yet generally get rich through the fees they charge rather than from any out-performance of the funds under their management.

The book includes many classic and amusing stories to illustrate the follies of Wall Street, with excellent cartoons by Peter Arno. One good example is about 4000 people flipping coins in a competition against each other. Each person who loses a toss is eliminated from the competition straight away. Obviously about half would win and half will lose each time they flip, but the people who had won ten times in a row would soon start to give lessons in coin flipping techniques. As with Wall Street some people may win, it usually doesn't mean anything.

The book is still relevant today because not much has changed. The fees charged by the professionals are too high and what they do for those fees is almost pointless in many cases. As I write this, the world is more than four years into the biggest financial crisis since the crash that possibly inspired the book. It is not just the customers who have been impoverished, but everyone, as money is printed and devalued to try to prop-up failing, debt-ridden banks, that have collapsed due to the greed and stupidity of the bankers and the inaction of governments and regulator. The bankers are making more money than they were even before the credit crunch, as they take bigger and bigger salary and bonuses out of the bail-out money that has been given to them in order to prop-up their balance-sheets.

Classic Investment and Finance Books

Where's my Yacht?

Where's my Yacht?
Where's my Yacht?
Fred The Shred Goodwin
Fred The Shred Goodwin

Fred "The Shred" Goodwin

New book by Iain Martin

A new book all about Fred ("The Shred") Goodwin and his role in the recent financial crisis has just been released:

"Making it Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy", by Iain Martin

The Royal Bank of Scotland, RBS collapsed and was bailed out by the UK taxpayer during the financial crisis starting in October 2008. This book looks at the role of Fred Goodwin, the former chief executive of RBS (known as "Fred the Shred") in this very messy economic down-turn in Britain.

Making It Happen: Fred Goodwin, RBS And The Men Who Blew Up The British Economy - by Iain Martin

Gold Coins - An insurance policy against economic turmoil

When the bankers run off with all of our money and more money is printed to get the banks out of trouble hyper-inflation could follow. While gold coins don't pay a dividend and cost money to store they do have a tendency to keep their value in real terms i.e. an excellent hedge against inflation, deflation and economic disaster.

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    • Andy-Po profile image
      Author

      Andy 5 years ago from London, England

      @julieannbrady: I have owned a few Jaguars... Can't afford a yacht though.

    • profile image

      julieannbrady 5 years ago

      Ah, just noticed a new yacht on the landscape here in Jacksonville, FL ... it belongs to Shahid Khan, the new owner of the Jacksonville Jaguars. Meow!

    • SandyMertens profile image

      Sandy Mertens 5 years ago from Frozen Tundra

      History keeps repeating itself. This book is timeless. Excessive fees and short sellers are part of downfall for depression. Blessed! Please add this to the plexo on my Valentine Gifts, What Sold and Blessings 2012 lens.

    • TheLittleCardShop profile image

      Malu Couttolenc 5 years ago

      Very good and informative article Andy. I wonder if we will ever stop paying excesive fees.

    • TheLittleCardShop profile image

      Malu Couttolenc 5 years ago

      Very good and informative article Andy. I wonder if we will ever stop paying excesive fees.