where are the customers' yachts

A Wealth of Common Sense

10 Great Lines From ‘Where Are the Customers’ Yachts?’

Posted February 15, 2015 by Ben Carlson

Where Are the Customers’ Yachts by Fred Schwed was written almost 75 years ago. I only read this book for the first time a few months ago and it’s remarkable how well it still holds up after all these years. It’s probably the funniest investment book I’ve ever read (out of an admittedly small set of competitors).

Here are some of my favorite lines:

1. On using statistics to your advantage:  “One can’t say that figures lie. But figures as used in financial arguments, seem to have the bad habit of expressing a small part of the truth forcibly, and neglecting the other part, as do some people we know.”

2. On the value of “I don’t know”:  For one thing, customers have an unfortunate habit of asking about the financial future. Now, if you do someone the single honor of asking him a difficult question, you may be assured that you will get a detailed answer. Rarely will it be the most difficult of all answers – “I don’t know.”

3. On the cyclical nature of the markets:  “When “conditions” are good, the forward looking investor buys. But when “conditions” are good, stocks are high. Then without anyone having the courtesy to ring a bell, “conditions” get bad.”

4. On the usefulness of theories:  “All of these theories are true part of the time; none of them true all of the time. They are, therefore, dangerous, though sometimes useful.”

5. It’s a little different every time: “History does in a vague way repeat itself, but it does it slowly and ponderously, and with an infinite number of surprising variations.

6. On the emotions of losing money:  “Like all of life’s rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. You cannot convey to an inexperienced girl what it is truly like to be a wife and mother. There are certain things that cannot be adequately explained to a virgin by words or pictures.”

7. On second-level thinking: “Those classes of investments considered “best” change from period to period. The pathetic fallacy is that what are thought to be the best are in truth only the most popular – the most active, the most talked of, the most boosted, and consequently, the highest in price at that time.”

8. On leverage: “A man who borrows money to buy a common stock has no right to think of himself as a constructive social benefactor. His is just another fellow trying to be smart, or lucky, or both.”

9. On short sellers before the Great Depression:  “Before October 1929, nobody objected to short sellers except their families. The families objected to going bankrupt.”

10. On who’s to blame for poor advice:  “The burnt customer certainly prefers to believe that he has been robbed rather than that he has been a fool on the advice of fools.”

Source: Where Are the Customers’ Yachts

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A Wealth of Common Sense is a blog that focuses on wealth management, investments, financial markets and investor psychology. I manage portfolios for institutions and individuals at Ritholtz Wealth Management LLC . More about me here .  For disclosure information please see here . 

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Where Are the Customers' Yachts?: or A Good Hard Look at Wall Street

Fred schwed jr. , peter arno  ( illustrator ) , jason zweig  ( introduction ).

208 pages, Paperback

First published January 1, 1940

About the author

Fred Schwed Jr.

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Where Are the Customers' Yachts?

• or A Good Hard Look at Wall Street
• By: Fred Schwed Jr. , Peter Arno
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Publisher's summary

Humorous and entertaining, this book exposes the folly and hypocrisy of Wall Street. The title refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers' yachts were? Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers. Full of wise contrarian advice and offering a true look at the world of investing, in which brokers get rich while their customers go broke, this book continues to open the eyes of investors to the reality of Wall Street.

• Unabridged Audiobook
• Categories: Money & Finance

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What listeners say about Where Are the Customers' Yachts?

• 4.5 out of 5 stars 4.4 out of 5.0
• 4.5 out of 5 stars 4.6 out of 5.0

Reviews - Please select the tabs below to change the source of reviews.

Audible.com reviews, amazon reviews.

• Overall 4 out of 5 stars
• Performance 5 out of 5 stars
• Story 5 out of 5 stars

• Srisai Vikash Akkineni

Keep reading and finish this book for a good laugh!

Funny, informative, and generally light on material and wisdom. This book was definitely worth a read for a couple of good laughs. And the author is not wrong. The world needs Wall Street. But nobody, not even those on Wall Street, can truly know what they are doing when it comes to investing due to psychological, social, and political forces.

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1 person found this helpful

• Overall 5 out of 5 stars

• Anonymous User

entertaining and enduring

markets and investors haven't changed much over last century. concise , insightful, and funny. recommended for anyone want to get an honest and piercing take and wall street

Laughing at myself, most enjoyably

No one, having dabbled in active securities trading for longer than a year, should put off reading this book, even a moment longer. You owe it to yourself to take a good, solid look in the mirror and explore the mirth of seeing the absurdity of it all. I still trade and will still trade and will likely make a tradition of reading this book at the end of every fiscal year.

• Overall 1 out of 5 stars
• Story 1 out of 5 stars

• James R. Eagleton Jr.

I doubt that Warren Buffett ever recommended this book

This book is not funny and it has no material of value to me whatsoever

• Story 4 out of 5 stars

Great read after working with Private equity

most people on Wall Street aren’t any luckier or any smarter than the average person. After working with Private Equity I came to really appreciate the humor. Hit me at the right time

Surprisingly good!

I was blown away by how entertaining and insightful this book is, considering how long ago it was written.

Comedy more than anything

Was a descent book, more comedy about wall street than anything else. Still worth a listen for entertainment only

Pretty funny

Very entertaining. I did get a few laughs out of it. Great advice in a not direct way.

Relevant Insights for today

Amazing to think this was written so long ago…. Demonstrates that Wall Street hasn’t changed much

• Overall 2 out of 5 stars
• Performance 4 out of 5 stars

• Kindle Customer

the intro was the best part

I did not like this book. First, the book is only 4 hours long. However, there are 3 introductions. this leaves the book at 3 and a half hours. Second, the prose of the main text is nothing like the story provided in the sample (which is from one of the introductions). Third, the book tells no stories. It is a wordy tongue in cheek attempt at humor describing various participants tied to the act of investing. On a positive side, the narration was good.

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Book Summary of Where are the Customers’ Yachts

Key takeaways and quotes from a classic book on markets and the investment business.

Where are the Customers’ Yachts was written in 1940 by Fred Schwed, an investment professional. It’s one of my favorite books on markets and I’m sure it will still be timeless 80 years from now.

The origin of the title:

Here are my takeaways from the book plus some great quotes:

• Making money is different than sounding smart. “I don’t know” is the most difficult answer – but usually the correct one. Some financial professionals have invented a new language for saying nothing in a variety of ways.

• Knowing a problem doesn’t mean you know the solution. For example, some Canadian pension funds are leveraging their portfolios because low expected returns raise the likelihood of future deficits. They identified a problem – but I’m not confident the solution is to lever up ten years into an economic expansion with high valuations and low yields.

• The biggest problem for most investors is their own emotions. This is a trope in financial writing – but it’s so true. If you constantly jump between different strategies you’ll look up at 65 and have little to show for all your years of saving. The best portfolio is the one you’ll actually stick with.
• Safe investments can fall out of fashion. Canal bonds were considered safe until railroads upended the canal industry. Russian government bonds were staples of European investment portfolios until the 1917 revolution wiped out their value.

• The truth about most investors. Most  investors don’t admit they are expert rationalizers in finding profound reasons for hunches. “The inability to grasp ultimate  realities is the outstanding mental deficiency of the speculator.” Some investors would rather go broke than admit their guess was wrong.

• The ability to sit still is a superpower. Most people “suffer from the inability to do nothing.” Some investors want to own as many securities as possible. Occasionally I get asked why I don’t make satellite allocations to assets like REITs or gold. I wrote a post showing why. A 5% tilt might make an investor feel diversified but it doesn’t impact portfolio performance.

The book is a rare combination of wisdom and wit – I highly recommend it. You can find used copies on Amazon for $5.

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Where Are The Customers' Yachts?

Fred Schwed's iconic 1955 book "refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers' yachts were. Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers."

Since then, how much has changed?

Do you know what your investments are costing you? If you’re not sure, you’re not alone. It’s not like you’re handed a menu of charges to choose from when it’s time to place your order. Even when you know where to look for financial costs, the information can be difficult to digest.

Let’s fill in some of the blanks by covering three significant sources of investment costs: fund management fees, (trading) costs, and advisor costs. 

Fair Fund Management Fees

We typically invest in a mix of funds towards efficiently capturing global returns without having to juggle thousands of individual securities at a time. With most client portfolios holding tens of thousands of individual securities, what a task that would be!

Cost-effective diversification is a common strategy, and the basis for many popular investment options, including Vanguard's LifeStrategy Funds and more concentrated funds including the  iShares Core S&P 500 ETF . In exchange, the Vanguard or iShares managers seek reasonable compensation for their services. 

What’s “reasonable”? To discover how much fund management is costing you, start by looking for each fund’s expense ratio . You can find this information in the fund’s prospectus, or by searching online for its name or ticker symbol. Many broad market index mutual funds or ETFs have annual expense ratios of 0.02% (2 basis points) or less. If a fund’s annual expense ratio approaches 1% (100 basis points) or more, we advise caution - almost certainly, you should think twice about investing in it.

Some fund managers also pile on extra fees, or loads, beyond the ones reflected in their expense ratios. These should also be disclosed in the fund’s prospectus, and can include:

• A one-time front-end load when you buy shares of the fund
• A one-time back-end load when you sell shares of the fund
• Similar contingent deferred sales charges (CDSCs) and other redemption fees

Hiding and Seeking Fund Fees

Because fund management fees are typically bundled into each fund’s share price, you’ll barely notice they’re there. But they still cost you real money.

For example, in a recent working paper, “ Obfuscation in Mutual Funds ,” academics from the University of Washington, MIT, and The Wharton School at the University of Pennsylvania compared the 2019 costs and performances of two S&P 500 Index mutual funds. Before fees , their gross returns were nearly identical at 31.46% vs. 31.47%.

But one fund manager charged a lean 0.02% (2 basis points). The other one charged up to an all-in 5.08% (508 basis points). Once you know that, it’s easy to tell which fund will leave more money in your pocket after fees .

Are you having trouble finding a fund manager’s fees to begin with? Consider this central finding from the same paper :  

“...we find evidence consistent with funds attempting to obfuscate high fees.” 

In other words, the study found that lower-cost funds usually provided short, easy-to-understand fee disclosures; the higher-cost funds often buried their costs in lengthy and complex legalese . 

Why complicate things? When searching for a particular type of investment, there are almost always funds available that do not  charge loads and similar add-ons, and do clearly disclose their costs.

Comparing Costs

Low costs are important. But they’re not the only  reason to favor one fund over another. Some investments cost more to manage because it’s more expensive to participate in their target market. 

For example, an investment in a U.S. market fund will usually have lower expenses than an investment in a non-U.S. market fund. So, first, identify available investments that fit your unique investment goals. Compare their expense ratios, apples to apples. Weed out any funds that charge loads, or bury their fee disclosures in long-winded blather. Then  select suitable funds with the lowest costs. 

(Trading) Costs 

In addition to your fund management costs, custodians, brokers, and trading platforms also make money off your investment activities. Take a step back from the mutual funds, ETFs, or other holdings you decide to invest in to consider where these holdings live and reside—and what does it cost to buy, sell, and hold them? 

An Account of Your Accounts

First, let’s define a few terms: 

Investment Accounts:

It’s easy to answer where your holdings live. They live in two main types of investment accounts: 

• Individual accounts, which you set up and manage on your own (along with your advisor).
• Employer accounts, such as 401(k) or 403(b) plans, which your employers set up and may manage for you. 

Custodians/Brokers: 

There are two places where your individual and employer accounts typically reside:

• Traditional custodians, like Schwab, Vanguard, or Fidelity. 
• Online platforms or “robo-advisors,” like Robinhood, Wealthfront Advisers, or Schwab Intelligent Portfolios®. 

All of these "places" are known as custodians. Just like a bank holds your cash, a custodian holds your investment assets. 

Your custodian uses brokers to execute your investment trades. Some custodians double-duty as the broker; others contract with third parties. 

The Cost of Doing Business

So far, so good? Now that you’ve got a lay of the land, here’s an important insight … 

It really doesn’t matter which types of accounts you’ve got, or where your holdings reside. You’re not the one trading in the market. You (or your advisor) places trading orders . Your account custodian takes it from there.  Therein lies additional costs: the costs of holding and trading everything you’ve got.

Those “Free” Frills Can Cost You 

Until a few years ago, brokers would almost always charge a commission whenever they executed a trade for you. In a more recent “ race to zero ,” many providers are now touting commission-free trading. But is that trading really free? If you take one thing from today’s piece, here it is: 

As an investor, whenever you’re being led to believe you’re getting something for nothing, your best bet is to assume exactly the opposite.

It stands to reason: Custodians and brokers must be profitable, or they’d go out of business. If they’re not charging a commission on your trades, they’re still making money somehow. It’s just not where you’d expect to see it, nor can you tell how much it’s really costing you. 

Tricks of the Trading Trade

Unfortunately, hidden costs usually mean higher costs. Following are a few tricks of the trading trade that often replace or augment more transparent pricing.

Cash Sweeps and Lending Practices:

Ideally, you actually invest most of the money you’ve earmarked for investing. But you probably also hold a little or a lot of cash in your investment accounts. Some custodians have been profiting handsomely by quietly sweeping this cash into their in-house, low-rate bank accounts, instead of paying you market-rate interest. They can then reinvest your cash in higher-rate holdings, or lend it out and earn interest on it—and keep the difference for themselves. Add everyone’s cash together, and the profits can pile up.

To illustrate, a 2018 San Francisco Chronicle piece reported average money market rates were around 2% at the time, while average bank sweep accounts were paying closer to 0.27%. The article described these practices as “similar to the way many airlines have cut fares and made up for it with fees for baggage, seat assignments and overpriced food.” 

Payment for Order Flow:

As described above, your custodian arranges for your trades to be executed. In theory, they’re required to seek “best execution” for your trades. In practice, one common technique is to use payment for order flow to seek competitive trading bids from third parties. Sometimes, this can generate more competitive pricing that benefits you. But it also can create conflicting incentives if an entity offers your custodian more payment (for them), without also ensuring best execution (for you). 

Platforms have been under scrutiny on this front, including a 2020 U.S. Securities and Exchange Commission (SEC) charge that Robinhood was misleading customers about the true costs of their trades. Neither admitting to nor denying the charge, Robinhood paid a $65 million fine and agreed to review their payment for order flow and other best execution policies and procedures. 

Bond markups/markdowns:

If you’re trading in individual bonds, there are usually significant hidden costs known as markups and markdowns. When bonds are bought and sold, there is the equivalent of a “wholesale” versus “retail” price. The markup/markdown is the difference you pay above the “wholesale” price. This undisclosed difference typically goes to the broker, in addition to any disclosed commissions paid.

According to Investopedia, " The commission can range from 1 to 5% of the market price of the bond. "

Advisory Costs

Before we wrap, let’s talk about our own advisory costs.

These days, you don’t need an advisor to manage everything we just discussed. You can look up fund expense ratios on your own, and watch for loads and other fees. You can set up and fund your individual accounts, and decide how you’d like to invest your retirement plan assets at work. You can be diligent about minimizing uninvested cash in your investment accounts. 

That's why we suggest nine different commission-free options in the Costs section of our website at www.openwindowFS.com/costs .

As an independent, fee-only, fiduciary advisor, we certainly help our clients with all these logistics, and more. But more than that, we provide professional, objective advice on everything related to your total wealth:

We advise you on managing your wealth across your total investment portfolio, wherever your accounts may reside . If your only advice comes from a custodian or trading platform, it’s likely to only apply to your investments with them, without considering assets you hold elsewhere. Plus, if you could do better elsewhere, don’t expect to hear about it from them.

We advise you on your total wealth interests . Do your investments best reflect your personal financial goals and risk tolerances? How should you use insurance to protect your wealth? How can you spend safely in retirement, and which accounts should you spend down first? What about Social Security? Are your estate plans up to date, with accurate beneficiaries across your various accounts and policies? How can you effectively draw personal wealth out of your business? What about those corporate stock options? How can you integrate your charitable giving with optimal tax planning? These are just a taste of the areas we advise on. 

We advise you according to your highest financial interests . Even “free” trading can be horribly expensive if it runs counter to achieving your greatest financial goals. In our fiduciary relationship with you, we’ll show you how to minimize hyperactive trading, make the most of the market’s available returns, and manage the very real risks involved. A commission- or fee-based advisor representing others’ interests is unlikely to do the same. 

When you hire Open Window as your independent, fee-only advisor, you are purchasing our all-in fiduciary advice. Our costs are clearly disclosed and are our sole source of compensation. Our clients know the exact cost, with no commissions, no kickbacks, no surprises. Helping families illuminate and eliminate excessive investment costs is one way we strive to "pay our own way" as an advisor.

When done right, our cost is a small fraction of the value we offer: 

• By helping you make better decisions, make them earlier, and by avoiding costly errors.
• By seeking a long-term investment return that exceeds other comparable options.
• By seeking a lower lifetime tax burden, and the benefits of tax-efficient wealth transfer and charitable giving.
• By helping to provide peace of mind while saving you time and energy.

If you’d like to explore further how we can enhance your own financial experience, please be in touch with us today at www.openwindowFS.com/connection . 

July 21, 2021

Where are the customer’s yachts?

Dividend Investing , REITs

Written by:

Christopher Ng Wai Chung

In 1955, Fred Schwed wrote a book entitled “ Where are the customer’s yachts”, where someone visited the harbours of New York and found the waters littered with luxury yachts belonging to bankers and brokers who made it big on Wall Street.

The visitor then asked the guide a naïve question: “Where are the customer’s yachts?”

The book raises an important point about the financial industry , giving financial advice was highly lucrative, but receiving and acting upon that advice was not.

Because if advice worked, there would be more yachts belong to the customers.

The customer’s yacht: An ERM graduate’s $500,000 portfolio

The Early Retirement Masterclass (ERM) program has graduated 21 batches or 552 alumni. Being a program that has run for three years, we are finally seeing an opportunity to present some of the more stellar results coming out from the program.

One student was kind enough to allow me to pay a visit to his “yacht”, hints of a lifestyle based on adopting 12 sample portfolios of the ERM program.

Student M, a finance professional in his mid-30s, attended my program as part of Batch 10, which was conducted in December 2019. I was not aware of his stellar performance until he participated in a refresher session last weekend.

I designed ERM so that all portfolios built by each batch are accessible in a private Early Masterclass Facebook group. So M was able to gain access to the portfolios constructed by batches 11 through 21.

In less than two years after attending the ERM course, M achieved the following mind-boggling results.

M accumulated almost half a million worth of stocks in his account with an internal rate of return of 10.45%.

About half of the portfolio is his equity, and the other half are borrowed funds from his broker.

But wait, there’s more. What’s interesting is that M’s wife, who is also a high flyer in the finance industry, has a larger portfolio based on the same set of stocks. This is a million dollars worth of stocks in a margin account after less than two years of accumulation!

Examining his portfolio in closer detail, we get the following results:

We can find the classic properties of an ERM portfolio here: a beta of around 0.8 , indicating a risk lower than the rest of the market and almost half of all gains arising from dividend payouts.

M produced dividend payments of $22,182 over a short span of two years.

3 tips from a successful ERM graduate

During the lab session last week, M shared some tips on maximising the utility of the knowledge gained in the ERM program.

1 – Ignore market downturns

The fact of the matter is that M did not join ERM at the best of times . December 2019 was almost the market peak before the pandemic crash. If you had followed Batch 10, based on my records on Stocks café, you have lost up to 24% at the depths of the pandemic.

This would have been enough for many students to throw in the towel, declare the trainer a charlatan, and give up investing for good.

M explained that he did the opposite and tried to adapt my approach during the recession of 2009. He kept building up new portfolios and farmed his income into his margin account to buy more stocks.

Throughout this entire process, the Singapore stock market turned from being the worse stock market in Asia in 2020 into an outperformer in 2021.

2 – Have the courage to employ financial leverage

Another aspect of M’s approach was that he was a steadfast supporter of leverage , which is also highly unusual given that he endured the pandemic crash at ground zero.

M employed an equity multiplier of x2 throughout the pandemic crash. In other words, for every dollar that he and his wife has farmed into the portfolio, he borrowed one dollar more from his margin broker—doing this required “balls of iron”, as Batch 10 could have been down 24% at its lowest point. As M employed leverage, he would be nursing a loss of approximately 51% in March 2020.

So his current performance of 10.45% was closer to about (10.45% x 2 – 3%) or 17.9% assuming his margin financing costs of 3%. 

3 – Maintain a high earning power

An astute observer would note that M is hardly an ordinary Singaporean from an earnings standpoint. As a family unit, M’s family earns easily within the top 10% bracket of taxpayers in Singapore.

Both he and his wife are successful PMETs in the finance industry. He shared that with their combined incomes, they could farm up to $30,000 into every portfolio published by the ERM program, and in the months when I did not conduct training, he would perform his screening and build his portfolio for a fresh injection of these funds.

When I asked M whether he made lifestyle adjustments to build the portfolio, he replied that he did not have to. Still, he said that switching employers once every 3 to 4 years helped increase portfolio growth rate quite drastically.

I get that most of us earn a more ‘average’ salary, I wasn’t even in the top 10% bracket when I was building my own ERM portfolio. That said, most ‘average’ folks like us can practically work towards owning our yacht.

Even without a yacht, M is a shining example for future ERM students

Finally, I would like to apologise to the reader who was expecting a picture of M’s yacht. He does not own one yet, but he did share that he actually intends to downgrade to living in a HDB in Singapore and build a palatial mansion in Thailand instead. For this alone, I’m cautiously optimistic that he would easily be able to afford a yacht one day.

M’s family is highly likely to will their first million dollars of net worth if they continue along this path. They manage their earnings very astutely, can save a generous portion of their profits, and has shown grit and determination to leverage an ERM portfolio even through the pandemic.

ERM is lucky to have someone like M on board. He is a brilliant showcase of what an actionable investment workshop can do for your life.

S-REITs Portfolio Performance: DIY versus ETF

Do Singapore REITs have a place in our portfolio?

Zhi Rong Tan

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Fred Schwed: Where are the Customers Yachts? Summary

Post by captmorgan50 » Mon Mar 20, 2023 2:03 am

Re: Fred Schwed Where are the Customers Yachts? Summary

Post by captmorgan50 » Mon Mar 20, 2023 2:04 am

Post by David Jay » Mon Mar 20, 2023 3:12 am

Post by David Jay » Mon Mar 20, 2023 3:19 am

Post by er999 » Mon Mar 20, 2023 3:37 am

Post by captmorgan50 » Mon Mar 20, 2023 3:40 am

Post by Carol88888 » Mon Mar 20, 2023 4:11 am

Post by captmorgan50 » Mon Mar 20, 2023 3:24 pm

Post by Bill Bernstein » Mon Mar 20, 2023 3:57 pm

Post by captmorgan50 » Mon Mar 20, 2023 7:43 pm

Bill Bernstein wrote: ↑ Mon Mar 20, 2023 3:57 pm Not to steal the OP's thunder, but here's my fave: In 1929 there was a luxurious club car which ran each week-day morning into the Pennsylvania Station. When the train stopped, the assorted millionaires who had been playing bridge, reading the paper, and comparing their fortunes, filed out of the front end of the car. Near the door there was placed a silver bowl with a quantity of nickels in it. Those who needed a nickel in change for the subway ride downtown took one. They were not expected to put anything back in exchange; this was not money – it was one of those minor conveniences like a quill toothpick for which nothing is charged. It was only five cents. There have been many explanations of the sudden debacle of October, 1929. The explanation I prefer is that the eye of Jehovah, a wrathful god, happened to chance in October on that bowl. In sudden understandable annoyance, Jehovah kicked over the financial structure of the United States, and thus saw to it that the bowl of free nickels disappeared forever.

Post by Harmanic » Mon Mar 20, 2023 8:56 pm

captmorgan50 wrote: ↑ Mon Mar 20, 2023 2:03 am • Rarely will it be the most difficult of all answers---“I don’t know.”

Post by Bill Bernstein » Tue Mar 21, 2023 12:10 am

Post by captmorgan50 » Tue Mar 21, 2023 1:48 am

Bill Bernstein wrote: ↑ Tue Mar 21, 2023 12:10 am Thanks for the kind words. I assume you're referring to VDE/VENAX having near zero foreign holdings. I guess I'm fine with that, I'm not willing to pay 30 more bp to get the foreign exposure from say, IXC.

Re: Fred Schwed: Where are the Customers Yachts? Summary

Post by LadyGeek » Tue Mar 21, 2023 1:49 am

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San francisco store requires customers to shop with employee escort to curb ‘rampant shoplifting’.

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A San Francisco store is no longer allowing customers to roam around and shop without being escorted by an employee in an attempt to stop “rampant shoplifting,” according to a report.

Fredericksen’s Hardware and Paint in the city’s Cow Hollow neighborhood has put up a sign announcing that during certain hours it will be taking customers only one at a time to curb the incessant thefts.

The shop is blocking off part of the store’s entrance and corralling shoppers in a waiting area until an employee is able to help them, KRON4 reported .

“Attention shoppers,” the sign reads. “Due to the rampant shoplifting, Fredericksen has introduced a one-on-one shopping experience: wait here and a clerk will be right with you to help you with all your shopping needs.

“We’re sorry for the inconvenience,” the notice concludes.

The store’s longtime manager, Sam Black, told the outlet that while the move could be a nuisance to customers it was worth trying for the sake of the business and its employees.

He said the shoplifting is the worst it’s ever been in his 24 years working at the business in the Golden Gate City, which is grappling with surging crime .

The staff has even had to drill down pots and pans to keep shoplifters from snatching them. They’ve also had to lock up tools and other hardware products.

“It’s pretty bad,” Black said.  “I mean, the dollar amounts are pretty significant, and with the tools and now we’re getting snatch-and-grabs when they take whole displays, so it’s getting kind of dangerous for the employees and the customers.”

The new rules are in effect for two hours in the morning and two hours in the evening, Black said. A table blocks the entrance to keep thieves from entering the store unattended.

“We just want to make it uncomfortable for the thieves so they go somewhere else,” Black said.

One customer told KRON4 the situation is “just sad.”

“Yeah, people aren’t happy,” Black said. “The regulars can’t believe it like we can’t believe it, but they’ve been really understanding.”

The security experiment has been going on for three weeks now, Black said. He said the store will review the results at the end of the month.

San Francisco supervisor Catherine Stefani called the situation “embarrassing” for the city.

“This situation is tragic and embarrassing for our city, and it’s all the more reason to get serious about solving our police staffing crisis,” she told the outlet in a statement. “We need more police on our streets, and we need them now.”

Other stores in San Francisco have abandoned their self checkout lines to stop criminals.

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