Most Profitable Customers, Speculative Advice

The farthest that certain brokerage houses have gone in that direction-and could have been expected to go-is to refrain from inducing or encouraging anyone to speculate. Such houses have confined themselves to executing orders given them, to supplying financial information and analyses, and to rendering opinions on the investment merits of securities. Thus, in theory at least, they are devoid of all responsibility for either the profits or the losses of their speculative customers.? Most stock exchange houses, however, still adhere to the oldtime slogans that they are in business to make commissions and that the way to succeed in business is to give the customers what they want. Since the most profitable customers want speculative advice and suggestions, the thinking and activities of the typical firm are pretty closely geared to day to day trading in the market.

Thus it tries hard to help its customers make money in a field where they are condemned almost by mathematical law to lose in the end.? By this we mean that the speculative part of their operations cannot be profitable over the long run for most brokerage262 The Intelligent Investor

• Overall, Graham was as tough and cynical an observer as Wall Street has

ever seen. In this rare case, however, he was not nearly cynical enough. Wall Street may have higher ethical standards than some businesses (smuggling, prostitution, Congressional lobbying, and journalism come to mind) but the investment world nevertheless has enough liars, cheaters, and thieves to keep Satan’s check in clerks frantically busy for decades to come.