Most people don’t like to fess up and say they messed up. It’s a lot easier on the psyche to blame someone else. We get ‘The Dog Ate It’. ‘Flat Tire’, and a close relative conveniently dying all as popular excuses.
Rarely do I meet someone regarding becoming his planner and hear someone tell me that they messed up, they didn’t understand what someone was telling them, they gave carte blanche to a complete stranger, or it sounded good at the moment and take a reasonable amount of responsibility for losing significant amounts of their own money.
If you are investing your money you should know some of the basics and if a broker or sales person tries to sell you something outside your level of education it should be a warning to slow down, possibly even stop, until you know more so you can make an intelligent decision. Lots of folks don’t. They think the broker knows best and go with whatever the broker recommends until it’s too late.
Some people just can’t get their minds around anything to do with money and math. If that’s the case then spend a few dollars and either hire a fee planner or see your CPA and get advice you can count on.
People don’t like to pay money to someone when they think the information should be free. Sometimes they think if they pay someone it is an admission that they are ignorant of basic money management.
There’s a sob story in the recent Time Magazine about how Cedar Rapids, Iowa was a victim of a broker and a Goldman Sachs product and indirectly billionaire John Paulson.
In July, 2007 Cedar Rapids treasurer Sue Vavroch was looking for a safe place to park $6 million for 90 days. She put out bids and a Wells Fargo broker responded with a product paying 5.4%. It wasn’t until after she invested the money that she learned that the investment was an unregulated private investment which had no duty to disclose to investors exactly what it was buying.
Needless to say the investment went bust and Cedar Rapids lost almost half their money. Obviously there is a lawsuit but this story is only one of hundreds in small towns throughout the country. It was a Goldman product and one where Paulson picked those bonds that would guarantee to fail so he could buy insurance on the bonds.
Poor Cedar Rapids and treasurer Sue Vavroch were victims but they did not have to be. Bells should have sounded at Treasurer Vavroch’s office when the yield was announced. One question regarding liquidity and transparency would have told the rest of the story but it seems the yield was more then enough to convince her to plunk down $6 million of taxpayer money into an investment she knew nothing about.
This is not an unusual story. All any of us have to do is look at our own city elected officials, the local school board or the elders at our church to see the financial ignorance that is making daily decisions with our money. School districts in Macomb and Wayne County have lost millions because of inept and criminal board members.
We appoint people to positions of financial responsibility because we either like them or they have shown that they have a measure of maturity about them. It doesn’t mean they can add past 20 without taking off their shoes and socks. It also doesn’t mean that they know how to examine a bond, a note or a fixed income investment. They also don’t know what to do with pay, bonuses or benefits or where to go to get the information.
Sue Vavroch never returned Time Magazine’s phone calls and there is no doubt in my mind that she screwed up royally. She could have gone to her local credit union and dumped the money there for 90 days, which is what she should have done. But Sue wanted to hunt with the big dogs and found herself at the rear of the pack.
Now, before you think I am picking on someone who got stung by some fast talking broker please go to your city hall, your church and your school board and look up all those trustee’s credentials. Betcha’ you can’t find one with extensive banking, investment or accounting background sitting on any of those boards while spending your tax dollars. Scary, huh?
Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
No comments:
Post a Comment