It is human nature to want to blame failures on others. As they say winners attract many owners and losers the opposite.
A year ago, the Nigeria Stockbroker was celebrated all over; investors loved them; they made money for investors, lots of it, they were even referred to in some tabloid magazines as the new big boys. Some of them even started to pretend they were rich and became big spenders.
The current economic meltdown and the resultant effect on the economy and the stock market particularly, changed all that. Not only are they now one of the most hated groups in the country, some are now some of the poorest. Every one now has a name for them.
Overnight they have replaced bankers as the new whipping boys. They have all suddenly become dishonest and manipulative, and in some extreme cases, called thieves .The reality is that stockbrokers are mere conduits that pass money from an original server to a final user.
Yes, some give advice, but no one is under any obligation to take their advice. Besides, it was the same advice that made all that money that kept bringing investors back.
I must state outright that as a member of the Stock broking community, some readers may accuse me, of bias and of defending stockbrokers. I am only interested in stating the case as it is, so as to present the side of the honest stockbrokers who are hardworking and also facing similar crisis as their investors. I don’t believe there are stockbrokers who like the current situation.
I am however unable to defend those stockbrokers who knowingly sell their investors’ stocks, appropriate monies put in their care or exhibit any other bad behaviour not expected of a serious professional stock broker. I can only say that the few in this category will no doubt represent a small percentage of our stock brokerage community and definitely, also indicative of the population of crooks in every other profession in the land- the 419 lawyers, the dodgy Estate agents, the bribe collecting bankers etc.
My point is that the times always dictate the current victim. Finance houses and their operators were the standard crooks in the eye of the public in the early 80’s when finance houses failed in droves and operators vanished overnight and investors lost money. In the 1990’s they were replaced by bankers and their failing banks.
The irony is that in all the cases, greedy investors and the public, including the cacophonic Nigerian press that over sell these institutions and their operators all refuse to acknowledge their role in the new situation. Investors who put money in wonder banks like ‘Forum Business Finance’ and ‘Plan Well ‘, (some of the most popular in their days) don’t see their role in building up these institutions that the most prudent man can easily evaluate as too good to be true and thus avoid .
The greedy investor insists on dealing in this fools’ gold only to come later to blame everyone but themselves.
They blame the operator, the regulators and everyone else. The fact is, that the inability to sustain these operations is obvious in the tell tale signs of the unusually high expectations, in terms of returns, and the herd mentality that usually goes with it. Everyone rushes to be the next millionaire without minding the risk.
This is not the first time the stock market and stockbrokers are being vilified for excesses; it is usually in difficult times. The critics, who see prices going up daily, don’t see anything wrong, until the prices start to trend down .That is when they descend on stockbrokers, charging them with everything from manipulation to all manner of fraud allegations.
1997 was another such year .The Nigerian Stock market was trending down, with prices falling, except that the trouble was essentially a case of uncertainty in the economy.
The political environment was stifling, the economy was in the doldrums, the Asian economic crisis that eventually spread to South America and Russia was just beginning and the Nigeria Stock Exchange was implementing the newly introduced Central Securities Clearing System, CSCS. Oil was selling way below $20 a barrel and the price of oil was going down even faster, as demand for oil slowed. Following the economic crisis in these other regions, our markets reacted and witnessed a slow down, not anything close to what we have today.
But then, there were very few players in the market. The prolonged slow- down also resulted in many commentators accusing the markets and its operators of manipulation and fraud.
I remember reacting at the time; I had written an article for the Guardian which was published with the title ‘Hate comes to the market’. I argued then that markets are what they are, they go up and they come down. The dualities of the elements that govern the market never change, people just don’t learn.
The truth is that the investing public needs extensive public education about how the market works. Investors, particularly new investors need to understand that the stock market is a market for long-term savings, not where you double money, unless of course you know what you are doing.
Even these set of speculators who embark on these high risk plays sometimes get caught and they pay dearly for it as we have seen recently worldwide. The stock markets have no experts, it is an approximation game. The science of pricing stocks is very imprecise and capable of fooling the most acclaimed experts; ask those celebrated stock operator in the 30’s some of whom were reputed to be a billionaires, they were wiped out with the 1929/33 crash of the American stock markets.
Most recently the Saudi Billionaire Al Walid who was considered a very shrewd investor because of his intelligent investment picks, especially his investment in Citibank, which was well timed resulting in rapid growth of his holdings in, he was caught napping in the current meltdown; he lost a bundle, when Citibank stock tanked, losing 80% of its value.
The celebrated American investor Warren Buffet is mostly confused as a stock market investor. Far from it, Warren Buffet’s strategy has largely been to play the stock markets as a long-term private equity investor.
He finds a good entry point to make a bet on a company and stay with that investment forever. His investment in Washington Post Company, Coca cola and Gillette fit this pattern of long-term investing. He has kept these investments for upwards of 20yrs, how many of our investors take this perspective?
The boom and bust story of the market is almost random .It usually follow a pattern of economic boom, creating liquidity that pushes prices up , creating profits who are lucky to own those stocks in that period, the stories of these new profits, draws in new investors to join the party .
At the height of it all, we all become giddy, until the economy slows down and there is a bust, prices come tumbling down and we are back to reality.
The most recent investors become the next victim and they all cry foul and the whipping boys in the stock markets are called to account for the foolish judgment of greedy investors. And the cycle begins all over again, Stockbrokers become the new Villains. Their good deeds in good times are all forgotten.
-Victor Ogiemwonyi
md@partnershipcapitalmarkets.com
