Margin-of-Safety

The Nature of Wall Street Works Against Investors 38
Some people work on Wall Street solely to earn high incomes, expecting to depart after a few
years. Others, doubting their own ultimate success, perhaps justifiably, are unwilling to forego
short-term compensation for long-term income that may never arrive. The compensation figures
are so large that even a few good years on Wall Street can ensure a person's financial security for
life.
Notwithstanding, a minority of people on Wall Street have maintained a long-term
perspective. A few Wall Street partner-ships have done a particularly good job of motivating their
employees to think past the current transaction. However, a great many of those who work on
Wall Street view the goodwill or financial success of clients as a secondary consideration; shortterm
maximization of their own income is the primary goal.
Many Wall Streeters, especially stockbrokers, have come to believe that their clients will
normally leave them after a couple of years, in effect rationalizing their own short-term orientation
by blaming their clients. There are no sure things on Wall Street, and even the best-intentioned and
most insightful advice may not work out. It is true that clients who incur losses may switch
brokers. This does not excuse those who assume that client turnover is the norm and thus seek to
maximize commissions and fees over the short term, making client turnover a self-fulfilling
prophecy.
Wall Street's Bullish Bias
Investors must never forget that Wall Street has a strong bullish bias, which coincides with its selfinterest.
Wall Street firms can complete more security underwritings in good markets than in bad.
Brokers, likewise, do more business and have happier customers in a rising market. Even
securities held in inventory to facilitate trading tend to increase in price during bull markets, When
a Wall Street analyst or broker expresses optimism, investors must take it with a grain of salt.