Financial Advice

January/17/2016 6:32AM
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Maybe there is some justification for the dislike of Wall Street these days. Since the fall of last year an estimated $5 trillion of investment wealth is gone. That’s a ton of 401K money from the average Joe and Jane who get a 401K from their employer. It’s college fund money, pension money, and 2-3 years of investment savings gone from folks who can’t afford to lose money.

I will make anyone who reads this a token wager. If you have or plan to talk to your investment person, this is what they will say. “This is not 2008. Just hang in there the fundamentals of the market are sound.” Or, large caps are paying 3% vs. 2% from the government bonds”. But, do they have your money in those dividend stocks and when you lose 2% a day in value what does the 3% matter? We call this dogma. Words that everyone uses when they are incapable of using logic.

Here are words from my 1-22-09 blog entry.


“Are private bankers, wealth managers, investment counselors, and money managers only worth their fees in a bull market? It would appear so. They have become collective weathermen. All they are doing today is trying to forecast the timing of the economic turnaround. Or, they spend their days trying to defend the trillions they have lost their clients in the last year. Apologists.

Every day it becomes more and more apparent that 99% of the people who earn fees by advising clients how to invest are not equipped to help clients make money in this economic environment. With few exceptions, none have lived through this harsh environment. That’s OK, but for the money the  clients are paying this huge base of professionals, you should expect some would re-train their skill set and adapt to the cards we are being dealt in this economy. How do they justify their fees by saying just hang in there until things change?

A handful of really savvy investors are making money in this environment. They use short sales, gold, and other non-traditional vehicles to do that.

The rest preach the party line. They say,”we will do portfolio re- balancing”. Translation.” I don’t know how to make you money in this economy, so let’s try to lose you as little as possible”. Next party line. “Trying to time the market is a fool’s game, you are investing for the long -term, you need to just hang in there”. Translation:” I don’t know how to make money in this economy, so just pay my fees and suck it up and absorb your losses”.

These experts, custodians of your future, are simply doing nothing and collecting fees. They are totally clueless. They are losing their own future while they lose yours. They have nowhere to turn to help themselves let alone help their investors.

At some point at the very near future, we need to consider divorcing these wizards. If the people we pay to protect our personal wealth are telling us,” I don’t know how”, we need to stop paying them until they figure it out. If you were feeling ill and went to the doctor and got sicker, went back and got even sicker, and finally the doctor said” I can’t make you well, I can only make you sicker”. would you keep going back? And pay each time you went? Paying these gurus of finance to lose money is no different. It’s the epitome of stupidity. We pay people to lose our money and to acknowledge they don’t know how to make money today.

This void will be filled. It always is in America. There will be a few professionals who will show us they can adapt to bad economies as well as good ones. They will be very busy”

Well, it isn’t being filled. I read a statistic where 25% of the wealthiest Americans fire their money manager every year. Why? They can’t beat the indexes. You and I would be far better off buying indexed funds from a discount brokerage and re-balancing between indexes as markets change.

I have two money managers. In September with one, I went 100% cash. Sold all equities and fixed income investments. It was like pulling teeth. I was told they wouldn’t tell me they told me so, but that by this time or sooner I would be very sorry. Well, I’m not, but I won’t tell them I told you so.

The second has been re-balancing and I called and asked for it to go much faster. Again, the debate. In the end, I said, “you are the smartest I’ve worked with in 40 years, but we are going to go faster”  His response, “so, I’m the tallest midget”? Guess he is.

I’m not investing in Wall Street until America get’s its act together. The people of this country are mad. Trump is right. And, distrustful. Of all institutions, including the investment community. Until that get’s fixed, I’ll be a seller and a bear.

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