You v. Wall Street

By Dennis Herula

What you don't know can wipe you out!

On Wall Street, it is said that the bulls make money, the bears make money, but the pigs get slaughtered. What Wall Street doesn't talk about are the sharks that tread the treacherous Wall Street waters, feeding off unsuspecting investors who try to navigate through the tides of the financial ocean.

Author Dennis Herula was an apprentice stockbroker in 1976. He was trained to “get the money, get more money, get all the money” from the investing public. He learned aggressive cold-calling techniques and hard-core sales pitches, as well as product pushing – all meant to maximize the investment firm’s – not the investing public’s – bottom line. He rose through the ranks to become a stockbroker, corporate officer, and hedge fund manager for 27 years. Today, he is serving a federal prison sentence for defrauding wealthy investors. Who better to learn from?

In You v. Wall Street, you’ll learn from a knowledgeable stockbroker what goes on in closed-door sales meetings, who actually receives the hot initial public offerings, along with facts behind proprietary in-house financial products. The book will expertly guide you through the investment maze, providing you with the ammunition you’ll need to fend off the sharks and how to recognize predatory methods investment firms use. At book’s end, you’ll know how to read your monthly investment account statement to know if your investment professional in acting in your best interests. You’ll also know how to address inappropriate investment advice and unauthorized trading activity.

• Language: English
• Publisher: Dennis Herula
• Release date: Jul 11, 2013
• ISBN: 9781301589333

Book preview

You v. Wall Street

Dennis Herula

Smashwords Edition

Copyright 2013 Dennis Herula

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TABLE OF CONTENTS

Introduction

Chapter One: GLADIATOR SCHOOL

Chapter Two: YOUR GOALS ARE NOT WALL STREET’S GOALS

Chapter Three: THOSE WHO PROTECT YOUR FINANCES

Chapter Four: EMPTY SUITS

Chapter Five: THE ENEMY WITHIN YOUR PORTFOLIO

Chapter Six: SCAMS FROM THE PAST

Chapter Seven: RED FLAGS ABOUND

Chapter Eight: HEAL THYSELF

Chapter Nine: CLIENTS of the STOCKHOLM SYNDROME

Chapter Ten: INVESTING ERRORS

Chapter Eleven: LET NOT YOUR HEART BE TROUBLED

Chapter Twelve: TIME TO GET TO WORK

DEDICATION

To my sister, Del, for her encouragement, and to my friend, Natalie, for her confidence.

INTRODUCTION

You vs. Wall Street is a guide intended to help you, the investor, navigate the pitfalls and greed of Wall Street. This guide was written by an ex-stockbroker, branch manager, corporate executive, and hedge fund manager who lived the stock market life for 27 years, and is currently serving a federal prison sentence for breeching ethical boundaries and betraying clients' trust.

What really goes on behind the closed doors of brokerage house sales meetings across the country? How is your investment advisor paid? What training does he undergo? And whose team is your brokerage firm on?

Who really gets those hot IPOs? Do you know how to read your monthly statement? What do you look for in your statement to verify if your investment advisor is working in your best interests? What can you do to protect yourself?

What you don't know can wipe you out!

The author lays it all out —- his knowledge and powerful checklists —- on the table as no one else can.

Chapter One

GLADIATOR SCHOOL

George Ball, E.F. Hutton’s president in 1977, stood before my stockbroker training class of 25 eager, newly-licensed stockbrokers. He exuded confidence and power in his blue Brooks Brothers suit, red tie, and black Oxford loafers. He was a diminutive man, but he dropped big names like so many snowflakes—-this congressman called him, that Hollywood producer met with him, President Carter called him at home for advice, and so on. It was all very exciting to a 29-year-old from a Detroit blue-collar background. The glamour of being on Wall Street, in one of the most prestigious firms of the era, and the career potential lying in my path, kept me up at night with dreams of wealth and power.

Ball told us E.F. Hutton’s dynamic history—of Hutton who had been a stockbroker who used the telegraph during the 1906 San Francisco earthquake to alert New York headquarters of the catastrophe and saving Hutton clients millions by giving them the news before it was published, enabling them to liquidate California assets; to the unique position the firm held with George Ball as a presidential advisor. I ate it up and was ready for bear. Turns out, I needed to be ready for bear—-and more.

A stockbroker’s major hurdle to success is getting over the fear of rejection. To desensitize us trainees to rejection, we spent our first week cold-calling business people all across the country, asking if they would be receptive to stock ideas from time to time. After the first two hundred hang-ups, my enthusiasm faltered, but the phone supervisor monitoring our calls drove me, using the fear of losing my job as motivation. I made over a thousand calls the first week, and had fewer than thirty people who wanted a call back.

In week two, we practiced calling our stockbroker seniors at various branches across the country to practice making a stock pitch to them. Their critique followed. My confidence grew again when the pros told me I had a good delivery.

In week three, I called the few businessmen who’d requested a callback, to make the same stock pitch I’d made to my senior stockbrokers. I opened several new accounts and was at the top of my class in both calls made and new accounts.

In week four, only fifteen of us remained. I didn’t know that ten were told to go home and look for other jobs. The rest of us were told that, in the next three weeks, we had to open at least one new account per day and do one transaction with that account. The office was open until midnight, enabling us to call the West Coast, maximizing the day from 7 a.m. until midnight. I stayed until midnight, even though I always made sure I had the new account by lunchtime. I used the extra time to set up the next new account. As it turned out, all stockbrokers live for the next new account.

In week five, we were down to seven trainees. The grind continued six days per week, calling businesses and residences alike. I hated calling on Saturdays but when the heat is on, you do what you have to do on Wall Street. It’s always about the next account, the next trade, and the big trade to come.

In week six, we were five. I finished first by opening the most accounts, averaging two per day. The phone manager invited us to stay in New York for advanced training.

Advanced training involved working with the top-producing commission generators in the New York branches. I sat in a senior stockbroker’s office, made calls, and did business while he listened in. I was urged to be more insistent, to ask for more investment money, to ask for a referral, to keep calling the prospect even when the prospect showed disapproval or reluctance to my frequent calls. When I sold a client a thousand shares of stock, I was urged to call him back if the stock crept up a little, pushing him to buy more because this move in the price was the precursor to much higher price levels. I was bullied into bullying the client into giving referrals again and again. Everything was must buy today, without delay, or you’ll miss the move. It was a pressure-cooker atmosphere that took a tough skin and numb mindset.

Not once did the phone manager or senior stockbroker ask me if I agreed with the stock selection I was pitching. No one cared as long as what I pitched had an advantageous sales commission attached to it. Whatever paid the most was the best. Research reports were skimmed over and beneficial highlights were used for the canned sales pitch. The truth rarely made its way into the spiel.

When I asked the senior broker about the research, he told me to never concern myself with it because it was of no consequence. He said that research was a function of Corporate Finance Departments, firms’ primary moneymakers, deriving income by arranging initial public offerings (IPOs), charging enormous fees for merger advice, and issuing stock and bond offerings for their corporate clients. Research departments were a cost to firms, providing buy, sell, and hold advice for their clients, corporate as well as individual. The research department would never issue a sell report on a corporate client. No corporate client wants to pay fees, only to be besmirched in a research report. Therefore, research is a function of the needs of the corporate finance department and does their bidding.

One of the easiest ways to open a new account was to offer prospects shares in IPOs. IPOs have several advantages