Merrill Lynch First 2 Weeks

I have spent the last two weeks on Wednesdays from 8:30-11:00AM at the JP Morgan Chase tower working at Merrill Lynch.  These first few weeks Mr Warren (my supervisor) is simply teaching me the ins and outs of working as an investment advisor and more specifically the philosophies of Merrill Lynch.   After these first few weeks I will start to try to better support the team with small tasks that “simply need to be done.”

On the first day Mr Warren went through in depth definitions of what a stock is and what a bond is and the differences between them.  As the stock market goes down the value of bonds goes up and vice versa.  This is because bonds being more stable than stocks are what people turn to if the stock market is declining making demand for bonds go up.  Bond prices decrease when the stock market is doing well as demand is higher for stocks in those times.  We also briefly discussed the difference between the stock market and the market cycle.  The stock market is completely unpredictable while the market cycle gives hints as to whether the economy as a whole will continue to do well or start to do poorly.  If the market is doing farther than 2 standard deviations from projections “bad things happen”.  If it is going down the obvious happens where people get scared and sell their shares which makes it worse.  The less obvious scenario with the market doing better than 2 standard deviations makes a lot of people believe that the market will stay good forever but when it inevitably goes down the extra exposure causes many people to lose lots of money, accentuating the loss.

In my second visit he walked me through a set of many different cycle charts ranging from more obvious ones like stock price to less obvious things such as small business loans.  The reasoning for having so many charts was, because of the unpredictability in the stock market, if one chart did well or poorly it could just be a good or bad day.  If however, all the charts have cooperating information you can be more reasonably sure that the market will continue to move in that direction whether that be good or bad.  For the second half of this visit Mr Warren had a call that he had to join so I observed one of his coworkers to see “the average hour” and see how the software they have integrates the cycle charts in order to know when to buy specific stocks.