Today's Investing for Survival

  Investing for Survival

            12 things I learned from David Tepper: #11

11. “After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.”

The sell-side provides services to clients for a fee. There’s an old joke that goes like this: “What’s the difference between the buy-side and the sell-side? The buy-sider curses at you and hangs up the phone. The sell-sider hangs up the phone and then curses at you.” The sell-side is selling and will tell you what you want to hear. The sell-side’s job is to directly or indirectly generate fees. Sell-siders do not have what Nassim Taleb calls “skin-in-the-game.”

Ben Carlson has described the life of a sell-sider: “When I worked on the sell-side the head of research pulled up the total number of buy and sell recommendations from every analyst during one meeting, there were only 3 sell calls — in the entire firm. He was basically begging these analysts to make a sell recommendation or two. Yet they weren’t really budging because… Relationships Matter. What I came to realize is that all of the number crunching didn’t matter nearly as much as the meetings and conference calls with company management. These relationships all carried much more weight than the financial models that the junior analysts toiled away at back at the office. The analysts didn’t seem to want to make a critical call against a company in fear of upsetting the management relationship where they got their questions answered.”