Broke and Broker

There is a pecking order on Wall Street.

We hedge fund dudes are, of course, at the top of the totem pole. Slightly below us (because they have to work much longer hours, the poor slobs) sit the private equity gang. Below them come the bulge bracket investment banks, in rigidly defined order: Goldman leading the way, Merrill bringing up the rear. Lower yet are the money center banks (snigger). And then, right at the bottom, is that vast and unexplored swathe of Middle America known to us only as ‘retail’.

Somewhere in the middle of this hierarchy one can find a curious tribe: the specialist brokers. These guys service, and simultaneously compete with, the market-making desks of various investment banks. It’s a thankless job, with razor-thin margins, intense production pressure and negligible job security.

Brokers typically have none of the advantages (capital base, risk appetite, cross-platform networks) of their investment-banking competition. So they have to rely on ever-more desperate measures to drum up business. And what, I hear you ask, might those measures be?

The answer is obvious: freebies that are even more lavish than those disbursed by their dealer counterparts. I have lost count of the number of gewgaws I have received from my broker friends: everything from gym bags and squeeze balls to golf trips toting free Blackberries.

(Aside: one particular broker even paid my monthly phone bill for the aforementioned free Blackberry. I think the rationale was that I could use the device to execute trades – not just phone them in, actually execute on the broker’s main electronic platform – and hence it was a legitimate business expense. Hey, if a broker can set up a special execution keyboard with a dedicated line connecting me to their servers at their expense, why not do the same thing wirelessly?

As it happens I don’t think I ever made a call, let alone executed a trade, on the Blackberry – I never could get used to its bulky form factor. I lost the phone when moving countries a few years ago, but I never informed the broker, and they never asked. For all I know they’re still paying the monthly bill. )

But the freebies were only part of the deal. The other part, inevitably, involved dinners on a scale that would put Roman emperors to shame. It’s no coincidence that every single broker salesman I know is morbidly obese. I don’t mean common-or-garden-variety overweight, I mean seriously, debilitatingly, grossly fat. Eating New York sized steaks four nights a week will do that to you.

Consider my broker friend Bill. Bill was the Platonic ideal of a frat boy: easygoing, friendly, not overly burdened with intellect, happy to have a good time, all the time. He liked nothing better than to head out, sink a few beers, try (and fail) to pick up any cute female bartenders, then drown his sorrows in chicken wings (or, if he was feeling ritzy, barbecue ribs). Bill was also fairly athletic in his youth: he played football for a well-known southern school.

Last I saw him, Bill was nearing 350 lbs, and he’s not more than 5’7”. He told me he was having difficulty sleeping at night because of stress- and weight-related breathing problems. He then suggested we go out to dinner at Babbo.

The amazing thing is that Bill was convinced he was living the American Dream. He was young, unattached, and making six figures in Manhattan: what more could a good ole boy want? That’s the essential perversity of Wall Street: it doesn’t just chew up your life (and other people’s money); it chews up your life (and other people’s money) and convinces you (and the aforementioned other people) that you wouldn’t have it any other way. Amazing, and sad.

(Postscript, September 2005: a miracle! Bill escaped the living death of being a broker salesman, and got a job on the buy side. Unfortunately, said job was as a mortgage trader. I heard the news and immediately doubled my short in TOL. What can I say, I’m a hedge fund dude. )