I’d rather lose half of my clients than lose half of my clients’ money.

“I’d rather lose half of my clients than lose half of my clients’ money.” – Jean-Marie Eveillard (First Eagle Global)

Josh Brown, who runs the blog The Reformed Broker, wrote an excellent piece today on how irrational clients and customers can bring down even the best of money managers. We think it’s a very informative read. Pasted below is an excerpt from the intro, accompanied by the list of the top 25 most overvalued stocks on the market today on the basis of our research. There is a link to continue reading the piece from Josh at the bottom of the table, too. 

Something tells me there are some serious blow-ups on the horizon for professional managers.

I feel this because stock market returns have been explosive – specifically in high beta, high octane names – and investors’ expectations for future returns tend to extrapolative. As profits increase, so too do their beliefs that even more gains are coming. In an atmosphere like this people begin to lose perspective and become accustomed to the miraculous. They push those who manage money for them for the unattainable and professionals eventually succumb.

This is the main reason guys blow up in my industry…

A small but vocal minority of wealthy people in this world believe that because they’ve been successful in their career, this success ought to automatically translate to any endeavor they get involved with…and they view profits from speculation as something of an automatic, god-given right…

The typical expectation of these types of investors is something along the lines of “I want all the gains of the hottest stocks out there, none of the losses of a general market decline, I want the ability to override your decisions if they look to be wrong and I want a running commentary from you about what you’re buying and selling every step of the way so that I can play along at home…”

If this is your bread-and-butter client, I wish you luck.

Professional money managers with experience and good instincts learn to Just Say No to these types of clients in advance…

          — The Reformed Broker, Rule Number One: Don’t Blow Up, March 17, 2014

High Beta, High Octane Names – Top 25 Most Overvalued Stocks

To continue reading Rule Number One: Don’t Blow Up >>

Refreshed June 2017.