Chart Of The Day: Porsche Sales By Model 1995-2010 (YTD)

Have you ever considered that people are not jealous, but actually view your industry as a parasitic drain on society? Perhaps there is legitimate frustration that comes from watching your industry pay politicians to reduce taxes and regulation of its members, then become vastly wealthy while the people who actually do and build things in this society are treated as serfs in your investment schemes. Oh, and misspelling naiveté is probably not the best way to place yourself above the folks you refer to. I wish I could chuckle at your naiveté as well, but it has proved dangerous to simply laugh at what your industry is doing to our society.

@JLOSF: Apologies. I wrote a really decent response yesterday, but the posting engine ate it and I had to go to a meeting. The gist is that I am not angry; I simply took issue with you pinning people's dislike of your profession on jealousy. There are many legitimate reasons to have a problem with your industry other than simply wishing we were in your shoes. I well know the investment banker line that nothing could get done without you folks. The line goes that everything requires investment, and you are the ones who are responsible for carefully doling it out. The thing is, the people I worked with who told me that line were investment bankers, and they also had a little saying from their Goldman days: "we invest your money until you don't have any any more". Snark aside, the real point is that people invested in ventures long before the explosion of investment bankers, and they did it without being subjected to the exorbitant rents you all levy on the populace. Do you think we are incapable of investing without your industry to charge us 10% to "help" us? I know investment bankers who sneer at a 10% return. There are a number of issues here. Some of them are basic aggregation issues. If I'm investing an inordinate amount of money, I am willing to pay someone a nick in order to get it well invested. I'll pay a little more if they can get me an extra return. The return justifies the fees. This is the same line of thinking that leads shareholders to okay $50 million salaries for CEOs; the CEO is making billion dollar decisions, so it makes sense to pay a few million more for someone who is even marginally better than someone else. This is modern capitalism, where money values itself, and where aggregation puts a few people in charge of large amounts of money, lending their job the appearance of having very high "value". There are a few problems. One is that the investment banker doesn't actually provide any real value. They don't make the investments better - the money does that. The banker just enacts rent on the money for relocating it. The more they relocate money, the more they make. They are incentivized to just keep moving money around, because they make money the more they move. Also, they make money on gains without losing money on the drops. That's like playing with other people's money at the craps table, where you get a piece of the wins but don't share in the losses. Your strategy at that point becomes obvious and has tragic results for the original owners of the money. Another problem is that, in order to grow their business, investment bankers can do only two things: raise the rent they extract, or increase the amount of money they extract rent on. This leads to an ever-increasing amount of money the rest of us pay to your industry to do what we always did before. That's where my comment about parasitic behavior comes from. Your industry has learned to take an increasing amount of money from every other industry. I don't see the value that we're getting back. The last problem I have time to mention is the sociological problem. Societies with massive divides between rich and poor are unhealthy. They do not provide equal representation, equal access to innate constitutional rights, or a number of other things we claim to value in our US of A. Investment bankers are not any more learned or any more intelligent than doctors, lawyers, or more than a few electricians I've worked with recently. They just happen to be in the position of moving everyone else's money around. For that, they get massive amounts more money than anyone else. It's an unhealthy and parasitic system. When the Dutch economy in the middle ages became overburdened with finance and investment folks as a percentage of the total economy, it collapsed. That's because, while playing money games can appear to have tremendous value, it doesn't actually do anything. It doesn't actually make drugs or feed people or contribute to welfare. And the secret no one wants to talk about is this: the best investment is one that generates money while spending none. According to your industry, printing money would be the best business in the world. Costs are next to nothing. Profits are immense. The losses (in terms of inflation) are shared with a tremendous commons. Printing money happens to be illegal because it's recognized to be against the public good. What investment bankers are looking for, though, is an investment that is as close as possible to printing money without actually being illegal. The drugs, the goods, the services - those are all a by-product of your investments. Your industry could really care less if they happen - as long as the money they generate comes in. The goods are only important when they bring cash. The more cash returned for the less spent, the better the good. Remember that when you're out taking credit for all these great things your industry enables. So I'm not angry, and I'm happy to hear your thoughts and corrections. I realize we are now buried under the blog-pile, so I'm also happy to let it come up on a future thread... Cheers, C

C, First, lets delineate between investment bankers and brokers. Investment bankers take companies public, do M&A, advise on divestitures, etc. Their business is transactional. Their fees range from a fraction of a percent on a huge M&A deal to 7% on a small IPO. The fees on the recent GM IPO was really small, perhaps 1.5%. No investment banker charges 10%, ever. Brokers advise people on investments and charge commissions (often cents per share) or fees (.12 - 1.75% 0f assets). Yes, smaller accounts get charged more because they require as much work, and sometimes more, than large accounts. A fee dissuades brokers from excessive trading and better aligns his/her interests with the client"s. Please understand clients are the scarce resource in my business, so overcharging them turns them into ex-clients. Self-defeating, no? Again, no broker charges clients anything close to 10%. Perhaps you are thinking of hedge fund managers. They typically charge 1% of assets and 20%of profits, often with a hurdle rate and always with a "high water" mark. The hurdle rate is typically a short-term bond rate. For example, say investors could get 1% in short-term bonds and a hedge fund manager returns 12% in a year. His 1% fee comes off the top, the investor gets the net 1% (the hurdle rate), the other 10% is split 80/20. The investor ends up with 9%, the hedge fund manager 3%. I am fully aware of the litany of hedge fund manager morons out there: Madoff (not even a true hedge fund), Bayou (fraud), and anyone else you can think of. Bad guys, all of them. No argument here. Does "One and Twenty" sound expensive? My biggest personal investment is a hedge fund of funds (with another 1.25% layer of fees) that has trounced anything a do-it-yourselfer has done with ETFs and the like, through good markets and bad. Hell, you can buy the S&P 500 for free. Here's what you get: zero return over ten years with 18% annual volatility. I pay 3-4-ish percent annually with 1/3 of the vol and 6-7% annual return. I don't make the rules regarding the way society pays different professionals, but I recognize them. Is it unfair prison guards make more than teachers? Hell, yes. Also, I don't like flying regional feeder airplanes flown by pilots making less than In'n'Out Burger managers. Still, people choosing low-paying careers and automatically hating those who make a lot of money are foolish. I 100% agree that the US is becoming a two-tiered society, and it greatly concerns me. There are no stable two-tiered societies in the world, and we will end up no different if we do not change. That is why I donate my charitable time and dollars to organizations that promote education to high-risk youth. I also vote for every education bond and tax on the ballot. I am old enough to remember Prop 13, the Jarvis-Gann initiative, in 1978 here in CA. Bottom line: the naysayers (including me) were right. The tax savings screwed up my state's schools, and guess what: education is the key to a thriving middle class. I hope I have made you think about thing a little differently. I am now going quit this site so its readers can get back to reading about cars! JLOSF