Michael Lewis Gets Dupped!

I just caught an interview between author Michael Lewis, (Liar’s Poker and The Big Short) and Yahoo! Finance’s Daniel Gross and Henry Blodget.

Under the headline, “My Merrill Lynch Broker Screwed Me So I Fired Him and Switched to Schwab”, Lewis tells a personal story that involves owning some Lehman preferreds and Auction Rate Securities in his retirement account, having these exotics blow up, getting really irritated with his advisor, and closing his account at Merrill and transferring to Schwab.

As one listens to the interview, a number of different graphics pop up underneath their talking heads:

Beware of Wall Street Advice!

Dealing with Wall Street’s Conflict of Interest!

Don’t Listen to Brokerage Advice!

Ouch! Between the headline and the graphics, it’s not too hard to figure where this interview is going.

I certainly don’t want to be an apologist for Merrill Lynch or any other firm that got caught with their hand in the exotic derivative cookie jar. Yet, a number of points about this interview caused me to arch my eyebrows:

1. In the first place, it’s the height of irony that Henry Blodgett participated in this. For those of you who don’t know Henry Blodget, read this Wikepedia entry. Given his own tortured history with conflict of interest, you’d think he would have had the common sense and good grace to recuse himself from this session.
2. During the interview, Lewis says that he doesn't like being "sold". I don’t know what transpired between Mr. Lewis and his advisor. But in Liar’s Poker, Lewis recounts his antics as a bond salesman with Salomon Brothers in the 1980’s. Regarding the inherent risk of these particular securities, don’t you think he would have known? And don't you think that he'd know when he was being "sold"?
   
3. The headline of the piece, “My Merrill Lynch Broker Screwed Me…” has a pretty dastardly implication in my mind. “Screwed” is a loaded term. Yet, when I listen to the interview, I don’t get the sense that Lewis was “screwed.” Although there may have been some willful ignorance involved, on the part of the advisor and Mr. Lewis…“screwed” seems to be a word that was inserted for the purpose of attracting eyeballs to the headline. I guess it worked.
   
4. Finally, Mr. Lewis has an interesting take on what has happened to the advisory industry over the years. In his own words “The big firms have evolved since the 1980s, away from servicing the customer and maintaining nice, happy relations with the customer to managing friction with the customer on behalf of the firms’ traders.” In this case, he’s wrong…plain and simple. There is definitely an evolution that is happening within the brokerage firms, but it’s not this at all. It shows me that’s he’s pretty out of touch.
   

One last thing. My favorite graphic during this whole interview was, “How Big Short Author Michael Lewis Got Dupped by Wall Street.”

“Dupped”? What’s “dupped”? Do they mean “duped”?

Where’s the spell check? Where’s the editor?

That’s all for now. I’m done.

Have a nice day!

by Chris Holman