Wall Street has dirty secrets it doesn’t want you to know.
The way it operates may feel dark, shady, or just plain gross to anyone who’s been on the wrong end of its wheeling and dealing.
So what I have to say next might surprise you: Wall Street isn’t actually as bad as its reputation makes it seem.
Ultimately, it’s just an industry like any other. The irony is, Wall Street is the only place that doesn’t sugarcoat what it does. Everyone who works on Wall Street gets up early every day for one reason: to make money.
In a twisted way, Wall Street is the most honest industry about what it does. It’s a business… just like anywhere else.
For instance, when you go to repair your car, you might think, “Thank god mechanics love this stuff – I have no clue what’s going on under the hood!”
But mechanics are in business to make money, not to make your life better.
I know someone who hit a curb with her car. She brought it into the shop, and a seemingly cosmetic scuff turned out to be a $12,000 repair job. Yet it’s likely the shop sourced parts from a junkyard and pocketed a huge chunk of that $12k.
And it’s similar with medicine. In recent years, many private practices have been bought up by big private equity firms. They industrialized these boutique practices into patient factories. Some doctors must see up to six patients an hour – that’s 10 minutes per person. Frankly, Jiffy Lube gives your car more time and attention.
Yet many people have stories about the medical industry overcharging for services. My statement following a visit to the ear doctor, for example, showed my insurance was billed $795 for an “inner ear irrigation” that never happened.
It’s like a game to see how much they can make – while the insurer tries to pay as little as possible.
Of course, many doctors and mechanics are honest, hardworking people. But the big picture is that every industry has dirty little secrets that work best when customers are none the wiser. And Wall Street is no exception.
The difference, of course, is that learning about Wall Street’s secrets can help you make smarter choices with your money… and grow your profits into life-changing wealth.
So let’s peel back Wall Street’s curtain…
The Sell Side
I’m Jason Bodner, the editor of Outlier Investor here at Brownstone Research. And I know about Wall Street’s secrets because I helped keep them for over 14 years while I was working there.
But now I work hard to help regular investors profit from my expertise.
Today, I want to talk about two “sides” of Wall Street’s business – the “buy” side and “sell” side. The way each side takes advantage of investors can look a little different.
The “sell” side is made up of brokerages and banks. And it creates profits from Wall Street’s many fees… whether you see them or not.
For example, popular brokerage app Robinhood offers “commission-free” trading… with a hidden fee. That’s because the company sells your order flow to the highest bidder – who uses it against you.
High-frequency traders pay big money to see your buy orders come in so they can legally jump in front of them. They will buy the stock ahead of you and sell it back to you at a higher price.
And brokerage firms like Robinhood want you to make lots of trades so they can collect more money. That’s why they propel the myth that profits come easy with fast trades. Remember E-Trade? So easy a baby could do it?
The reality is, it’s not really in Wall Street’s interest to help regular folks make smart, long-term investments. The more we buy and sell, the more they can profit.
Hands are in the pot from the very inception of a trade all the way through – with broker’s fees, exchange fees, floor fees, clearing fees, and other transaction fees.
And the sell side’s goal is to maximize all those fees.
The Buy Side
The “buy” side, on the other hand, must make money for its clients. This includes hedge fund money managers, institutional firms, and market makers.
I’ve personally seen these kinds of “Big Money” players quietly gobble up millions of dollars of stock. Then they go on TV, announce their huge stake, and watch the share price rise as eager buyers pile in.
Or remember Bill Ackman? During the pandemic, he was on TV sobbing about the end of our economy… only to be quietly buying the same hotel stocks he claimed were on the brink of destruction at a discount while investors panic sold.
By manipulating people into buying or selling, Wall Street can profit from us… rather than the other way around.
These are just small glimpses into the shady underbelly of the financial world, but they show how Wall Street’s tactics can influence us…
How Does This Help You Win?
I share all this because I want to help investors succeed… instead of falling for Wall Street’s tricks. Once you understand how it ticks, you can start tilting the table toward you.
So how do you win? There are a few steps anyone can take…
Ask yourself why someone is touting or bashing a stock. What’s their motivation? Do the facts about the company support their claims? Imagine I were the one on CNBC: What is my benefit for talking up a stock I don’t own? Or bashing one I’m not short? Either I really want to help people… or I want eyeballs. In general, guests on CNBC simply want eyeballs, so you must ask yourself why.
Don’t buy and sell emotionally. Have a plan for when you want to buy or sell so you don’t get swayed by sudden volatility or news headlines. A strategy will keep you from buying and selling more often than you really need to.
Do your research. When my wife said we needed a new dishwasher, I spent nearly a month researching makes, models, features, pros, cons, and efficiency ratings. After extensive online research, I went to Best Buy to see and touch. After deep questions and mulling it over, I finally bought one. Sound familiar?
Now, ask yourself: “How much time do I spend researching my investments? People often spend way more time researching a major home appliance purchase than they do the stocks they buy. But it’s important to understand the strengths and weaknesses of the companies we’re investing in so we can make logical decisions. Dishwashers lose value. The right stocks can let you buy many, many dishwashers.
These steps may sound simple. But they can take a lifetime to master.
The good news is, if you don’t want to spend the time painstakingly researching stocks or you find yourself struggling with the right time to buy or sell – I do all the heavy lifting for you in my Outlier Investor service. I use my years of Wall Street know-how to scour thousands of stocks every day and identify the very best for my readers.
It’s how we’ve reached gains like 396%, 357%, 410%, and 801% in our model portfolio.
So if you’ve been enjoying my insights on Wall Street’s secrets, then I’d encourage you to go right here to learn how you too can start profiting along with us.
Editor, Outlier Investor
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