Q&A: I used to work at a Chop-Shop
So for 7 months I worked for a chop-shop. I know some people may be interested in my experience Q&A!
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Did you ever feel bad about "chopping up" companies, or if not was there ever a time you felt that chopping up a certain company was wrong?
Well we didn’t necessarily chop-up companies, that is more in the sense of a corporate raider or conglomerate holdings company that may do that. What I was apart of was more like wolf of Wall Street scenario, so if you have any questions regarding that I will be happy to answer!
Oh, okay gotcha. boiler rooms/chop shops are generally illegal though, so did anyone go to jail or go under investigation? and again, did you ever feel bad for pushing shitty stock to regular people?
Well as crazy as it sounds, boiler rooms are techincally not illegal, it all depends on what happens in the boiler room. Most of the companies that did this in the 90s we’re pushing bs companies that were traded on the OTC market and then mostly the owners of the company would create a pump and dump on these securities. This firm was pushing any stock with a “sexy story”. For example towards the end, most of the brokers were pushing GE due to the big name and low value in the market right now. I myself felt guilty everyday of my life..
While I was there, no one went under investigation for any sort of securities fraud but most of them had disclosures from clients. I knew this one broker who lost a client 500,000 dollars on one trade. Now the main illegal thing that these boiler rooms did was high pressure sales tactics, basically meaning reading off of a script to pitch clients. This is highly illegal but since none of the calls were recorded, no one ever got caught.
This post would be more active and interesting if you wrote down your story (beginnings, experiences, maybe a short story etc).
It helps many of those not familiar with the subject, to ask you many creative questions.
You are right, well the place I worked for was a firm that was reminiscent to a place like Stratton oakmont or a place like in the movie boiler room. While those movies depicted the environment of those places correctly, specifically boiler room, some of what actually happens was not invloved. The craziest thing that I saw there was that a broker literally threw an exuberant amount of cocaine on his desk and plummeted his head into it. Then got on the phone and cursed the fuck out of a prospect... it was a jungle in there.
Also I got deceived into getting the job.. a friend of mine from high school said he was working at an ivestment bank and making 12,000 a month. He said that the potential to make money was unlimited. When I initially went for the interview, they so called wanted me to be their “analyst”. What a load of shit that was, the secone day there, I began cold calling small business owners in the hopes of getting their business over to the broker I was working for (we’ll get into that guy later). Literally if you did not make 500 plus calls a day they wouldn’t pay you.
how many people did you think you were able to get to the broker as a percent of total calls you made?
While I was there, no one went under investigation for any sort of securities fraud but most of them had disclosures from clients. I knew this one broker who lost a client 500,000 dollars on one trade. Now the main illegal thing that these boiler rooms did was high pressure sales tactics, basically meaning reading off of a script to pitch clients. This is highly illegal but since none of the calls were recorded, no one ever got caught. I also got about 30% of the people that I called to buy stock from the broker I worked with. He was a good salesman; horrible person though.
30% an amazing conversion rate. Care to share your knowledge on persuasion?
If you have a lot to share, a DM would be nice.
Sure, so basically my job was to convince the prospect on the phone to talk to the broker about an idea in the market. The whole idea of the call was to persuade him to leave his current brokerage accounts and transfer over money to the firm I was employed for. We would basically tell them how the discount brokerage houses and big firms charge ridiculous fees and how the prices of investment advice within our firm are at a much better rate for the money under management. Then the broker would advise the client to start off with a small but promising trade, for example a lot of brokers were pushing GE due to the name and low value. The next trades, the broker would begin to ask for more money but for companies that were complete shit, to make the client feel like they were getting a bargain; that is when the hell would break loose.
This is a great question and I am glad you asked it. So you have to think of boiler rooms and chop-shops like this; these guys are the blue collared workers of Wall Street. These are either the rejects, the greedy or the plain stupid. Most of these guys did not even have a college degree, I actually think about 6 members of the company had degrees including myself. I personally believed that some people in there knew what they were doing was unethical and deep down knew they were fucked up doing it. Some guys were making so much money, that they did not give a fuck if it was unethical. You see these companies don’t have a portfolio manager or analysts at all, they pick their stocks with stories or through the reccomendations of CNBC. Some of these guys actually were legit, in the essence of creating a mitigated risk portfolio for their clients, but I just believe these guys got lucky with stock picks. As sad at is, I don’t believe any of these places will die soon either. Wall Street is so lucrative and to even remotely have a piece of the action can mean the world to some people.
The idea behind these firms are a success stories from their employees as well. That is what incentives employees to join. For example the guy I worked for was bringing in close to 7 figures and my friend was making 6 in less than a year. But there are some catches; desk fees must be paid, sales assistant fees must be paid and also every trade you made cost 75 bucks. There is a lot of inflated bullshit behind it.
1: What careers are you aiming for now and why did you leave?
2: Apart from soft skills, do you feel you have learnt any technical skills that are useful in other jobs (stock-analysis, global macro, fixed income?
3: How long do these type of firms last for and what factors contribute towards surviving?
4: Do you think you could be a profitable penny stock trader?
Finally, you think $MDXG gonna crash and where do you see the stock market going in the next 6 months?
I am aiming for a career in S&T preferably on a fixed-income desk. Unfortunately, I did not come from a target school so I am paying my dues and networking around to attempt to break in. I left because I could not take it anymore; the days began to drain me away from the guilt I was feeling.
So I actually was able to learn some technical skills (basic DCF and LBO) and as well was able to learn how to analyze the global markets from some of the traders at the firm. Some guys actually knew what they were doing in there; most of them had no clue though.
These firms basically last until they get caught. I met one broker who actually worked for the same company before he transferred over to where I was employed. He said once the firm would begin to get investigated upon, they would change names and as well appoint another partner of the firm as the acting CEO. As long as they are able to adapt and hide from the federal government, they will survive.
I do not think it is possible to be a profitable penny stock trader. You may get lucky on a couple of penny stocks but all around I believe a lot of those companies are just straight BS. There actually was a couple of brokers and traders that invested into the penny stock company $BTSC. The CEO would come on this conference calls and describe how he left a life of being a lawyer and created a company prioritized to blockchain services. Long story short, the guy lied about everything and put his neighbor's address as the business address for the company; I saw the stock go from .78 to 0.06 and literally saw people lose huge increments.
Bonus Question: No I do not think MDXG will crash, I think just some of their employees got a little too greedy, I tend to stay away from health care though. The market is ever changing and with all of this volatility, it may be impossible to truthfully analyze what will happen in 6 months. We have an outstanding amount of debt and we have a huge pool of tech stocks that are over valued. If you ask me, companies that have a solid foundation will continue to excel in the market (AMZN, NFLX, SWKS, X, DIS, AAPL, etc.). I used these stocks as an example because they either create a service, a good, or entertainment purpose; something that consumers will always spend top dollar for no matter what.
Thanks for spilling the beans and good luck in the job search. I'd suggest you invest in a RealVision tv subscription, it's really great.
If it doesn't work out, you could always be a bounty hunter for the SEC, tracking down all these chop shops.
takes me two seconds to figure out if guys are reading off a script
Well you may be educated and know what to look out for, most of these prospects were small business owners from the south or midwest. Most of these guys did not understand anything about a stock, they just wanted to make a couple of more bucks for themselves and their families. Unfortunately, they were prime targets for brokers that worked here, these brokers sounded as if they were from HBS. In reality, they were all uneducated as well but knew how to take advantage of people.
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