MoneyWeek book review: Where are the customers' yachts?

An entertaining look at the realm of finance in New York in the early twentieth century shows just how little has changed since then

Sometime in the early 1900s, an out-of-town visitor was being shown around New York's booming financial district. After touring Wall Street, he and his guide arrived in the Battery, where they saw dozens of expensive ships riding at anchor. "Look," said his guide. "Those are the bankers' and brokers' yachts." The visitor who was either extremely naive or extremely astute responded with the obvious question: "Where are the customers' yachts?"

Whether it's true or not, this story was part of Wall Street folklore during the roaring 20s, and inspired the title of this witty and elegant memoir of financial folly. Its author, the implausibly named Fred Schwed Jr, was a professional trader and seemingly a rather unfortunate one: his career began in 1927 and spanned the final excesses of the boom, the Great Crash and the Great Depression. "Shortly after that I left Wall Street, and I believe it was the next day that stocks began going up; they have continued to go up, with all but negligible interruptions, ever since," he noted wryly, some 15 years later.

Fortunately, he was more successful as a writer. More than half a century on, Where are the Customers' Yachts? remains a fascinating read and a potent illustration of how little has changed in the markets. Computer screens may have replaced ticker tapes, but greed, fear and stupidity still rule the roost, making Schwed's cynicism about the entire financial profession as justified as ever. "Wall Streetis a street with a river at one end and a graveyard at the other," he writes, repeating another vintage 1920s joke. "This is striking but incomplete. It omits the kindergarten in the middle."

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

But this is an amusing, almost affectionate book rather than an angry one. Schwed was fascinated by Wall Street, and particularly the way in which people delude themselves about their own abilities. "Pitifully few financial experts have ever known for two years what was going to happen to any class of securities The majority are usually spectacularly wrong in a much shorter time than that." And his barbed prose often worthy of Twain, Mencken or Bierce effortlessly skewers some of the more absurd notions to which markets are prone; witness an incisive section on the then-nascent world of options.

In what is obviously a zero-sum game, it's often claimed that "the buyer does well, the seller does well and it is not necessary to stress the point that the broker does well enough. Many examples can be cited to show all three of them emerging from their adventures with a profit. One wonders why the problem of unemployment cannot be solved by having the unemployed buy and sell each other options, instead of mooning around on those park benches".

Where are the Customers' Yachts? by Fred Schwed Jr is published by

John Wiley and costs £14.99

Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.