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A New Giant Sucking Sound



September 29, 2009 – Comments (14)

First let me make this clear.  I don't really care if people break even for a long period of time on their investments.  However, I hate to see the broad middle class get completely screwed by an investment industry and governements that are fundamentally dishonest and predatory from what I can tell from the inside of the retail financial industry.  It is wrong that the investment industry has gone from producing capital for production and that government has become (more) about skimming off the top, middle and bottom.  A lot of people will have to work well past 62 or 65 years old now because of a decade of fraud and theft that blew away the previous two decades of fraud and theft Think of the 1980s and 1990s as the apprenticeship period to what just went down, which unfortunately doesn't seem to be improving and is only standing still hoping nobody notices- sort of like T-Rex before he eats you. 

But, because I can only du so much, bottom line is I care if my clients and I make money.   These are the people I can help.  If that is at the expense of others, then that is because we as a society are breaking a fundamental rule of economics, which is, that we are fighting over slices of the pie, more than we are making the pie bigger. 

Because I believe the pie is going to stay the same size for quite a few years- smoothed of course for another likely round or two of wild volatility- many of your are condemned to not making any money on your portfolios for another five to ten years.  You are not going to make any money for a couple core reasons: 

First, government policy the past decade has worked against you.  Not just the Bush Whitehouse and Republican Congress through 2006 either (though they get about half the blame), but local and state governments, and foriegn governments as well.  You have allowed yourselves to become inundated with silly information that doesn't much matter to you and bought ideological mumbo jumbo.  You stomp your feet and pound your chest about how your guys have the right approach while of course none of them do.  You have brought this depression upon yourselves because you didn't pay attention, didn't feret out liars, deceivers and idealogues, didn't get educated and because you did get lazy and greedy while taking (and spending) the pretend money government types claimed to be getting to you through their policies that you tacitly allowed to take place.  You want to help your pocketbooks long term, vote out anybody who has been office longer than two terms. 

 Second, you are listening to the wrong people.  A year and a half ago I told a group of investors, "Don't for a minute believe that Wall Street is on your side.  Wall Street is not on your side.  Neither is the broader investment industry.  And government has abandoned the concept "that government of the people, by the people, for the people" is their role."  Folks, the investment industry is full of dogs.  A lot of people who look to skim off the sweat of your labor.  There are far too many financial planners, investment advisors (me?), bankers, brokers...  They are there because the income is fat for essentially doing little to nothing. 

Did you know that the Certified Financial Planner designation has NO education on investments?  Yet those CFPs run around talking about things they have no idea about and collecting money, pumping it into mutual funds, ETFs, wrap accounts they don't know how to manage and various strategies designed not to make you money, but make them and the sponsor money.  I remember an episode of the X-Files, where Mulder says something to the effect that "the FBI doesn't like anything that it can't easily catagorize, file and warehouse" (I'd love that quote if anybody can find it).  Most investment people follow that philosophy and add, "easily over charged."  (I know some financial "advisors" who had the audacity to raise their fees this year because their assets under management shrunk from last year- that is their clients lost money and the advisors didn't want their income to go down.)  So not only do you settle for bad investment advice, you pay too much for it even if it were good advice, and sometimes (usually) you get double screwed on expenses.

The investment crowd is currently running around telling people they have to get in now because assets are cheap.  While that may have been true in March, it is not true today.  When I bring it up with guys I see at lunch or seminars their eyes glaze over.  It's part "I don't care" and part "I don't understand."  Here is how bad they have been according to the Moningstar Fund Times: "Fund firms are well on their way to erasing the $251 billion in outflows they experienced in the second half of 2008, according to Morningstar fund flow data. This year, through Aug. 31, 2009, investors have poured more than $226 billion into U.S. open-end funds. In August, $54 billion flowed into U.S. open-end funds, making it the single biggest month of inflows since February 2007."  So, advisors, most of this money is advisor directed, yanked people out of investments from December to February, trust me, that is what was going on, then in the third quarter this year pumped people back in, making a new round of commissions.  Where was their "advice" a year and a half ago after Bear failed?  Folks, don't believe the hype that what was coming was unknowable.  It was greed and a betrayel of trust, pure and simple.  And now they are sticking people into bond funds which promise to get crushed in almost any scenario.  What the heck!!!

OK, here's a the simple truth about what to do now.  I know this not because I'm smart by the way, I know this because a rich guy told me in college to copy people who have done it before, regardless of what it is.  So here is the route to riches, or at least maybe retiring on schedule, it's easy and requires only a few movements- you know, to conserve calories.  Listen to self-made billionaires who challenge the investment industry establishment and government.  There are a few dozen out there that I have found.  These are the smartest money people in the world.  Ignore everybody else.  Everybody!  Invest like they do as best as you can.  This will take some effort because you will have to improvise.  If you want to invest like Jim Rogers, he's been nice enough to introduce some ETNs and ETFs.  If you want to invest like Bill Gross, heck he runs a few mutual funds.  George Soros, Wilbur Ross, Carl Icahn?  You can peak in on them via several good sites, including this one.  Oh yeah, there's some guy in Omaha named Buffet who has done pretty well and not only has an investment vehicle, but several good copycats out there.  Stop thinking you can out trade cheaters.  Stop thinking you are smarter than your neighbor, it doesn't matter.  Stop buying things you can't possibly truly know.  Start copying rich guys by buying what they buy when you can get it at the same price or cheaper, or hire them.  It's that easy.

14 Comments – Post Your Own

#1) On September 29, 2009 at 11:17 AM, checklist34 (98.39) wrote:

the problem with the system is that it doesn't reward productive endeavors (like, well, producing things) over transfer endeavors (like trading or writing an article to scare people out of a stock you like and then buying the dip.).

It is absurd that buying stocks and selling them has the same tax rate, and if anything a MORE POSITIVE view from society than starting a business that does something productive and creating jobs.  

And that is a statement I will stand behind, and that is coming from someone who has made 2x as much money investing in the market than I made my whole business career.

Money made investing is simply playing the odds and sitting around, not that it doesn't require talent, insight, timing, some luck, and a tremendous amount of work and effort.

But that work and effort is a tiny, almost silly or trivial, fraction of what it takes to start with nothing but some tips you saved waiting tables and invent some stuff and start a couple manufacturing businesses.  That is a life consuming, crushing, brutal endeavor.

Investing is more like a consuming hobby.

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#2) On September 29, 2009 at 11:56 AM, Entrepreneur58 (37.71) wrote:

I think you are wrong.

The investment industry has always skimmed money off the weak hands.  It was the same 40 or 50 or 100 years ago.  It will be the same 40 or 50 or 100 years from now.

If you are a weak hand, you are going to get skimmed.  You shouldn't play the game unless you are a strong hand.

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#3) On September 29, 2009 at 12:05 PM, russiangambit (28.67) wrote:

In theory, investment should be providing capital to productive companies to perform productive activities. It is a bit more riskier than loaning money, i.e. buying bonds. So, there should be risk premium to that. But in the end, return on stocks 5% or so above a regular bank loan rate . And it should be no more volatile ona verage than interest rates.

The fact tha t e can go in either direction 60% on an index just in one year, shows how from theory the stock market is and how close to the casino. It is a game of probabilities, just as checklist said.

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#4) On September 29, 2009 at 12:52 PM, VintageCat (< 20) wrote:

Generally speaking, those folks with limited knowledge of the game would not normally be at the table elbow to elbow with the experts trying to manage the hand that was dealt them, but the 401K really changed up who was at the table and how much of their assets would be on the line.   

The fact that skimming has always happened doesn't justify what occurred when much of the working and middle class lost their collective backsides playing the game as it was explained to them by those experts when their companies opted out of defined benefit retirement plans.  

The laws governing 401K/IRA classes of assets pretty much put the retirement savings of several generations on the table (in harm's way) to be skimmed unfortunately and now we hear that just maybe the individual investor, without a sound background in finance, might not be the best person to administer their own retirement fund.  A big "Duh!" and a heavy sigh.

Personally we were pretty lucky and timed our moves well but that isn't the case with most of our peers, many still down by a third and putting off retirement for a number of years, if they will ever be able to retire.

I fully agree with the core sentiment of this blog.  1 rec.  



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#5) On September 29, 2009 at 2:05 PM, 4everlost (28.82) wrote:

I agree that CFP and their bretheren are a waste of money.  I know that they claim to do more than advise investment strategy but who can pay someone a fee to recommend a portfolio of mutual funds that have a management fee? 

Rec #17 from me.

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#6) On September 29, 2009 at 2:47 PM, kirkydu (91.24) wrote:


I'm not wrong unfortunately.  While nothing is truly a zero sum game, the fact that the rules were bent and broken at increasing rates the past three decades is undeniable.  So what I'm a better investor than most, if the rules keep changing, or are just allowed to be broken by some, what difference does it make.  Me and mine are way up this year and a shade up the past two years because I knew there was cheating and manipulation.  Over 90% of people lost money that time period.  That's not capitalism, that's a fundamental breakdown of capitalism and it happened this time because flunkies and thieves have been running things. 

There's a couple great articles here:,com_weblinks/catid,25/Itemid,23/

Make sure you watch the William Black interview with Moyer.

I agree that productive endeavors are the heart of the economy and need to be focused on.  I hope we really gear a few generations in that direction again, because recently, it's been too much about stripping assets and skimming off the top, both at the expense of the system and society.

Thanks for the recs, never really expected that.  Just figured the daily bloggers would push me down the list.

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#7) On September 29, 2009 at 2:49 PM, jstegma (28.43) wrote:

rec from me.  The investment sales industry is a racket.


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#8) On September 29, 2009 at 3:47 PM, Tastylunch (28.52) wrote:



 great post



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#9) On September 29, 2009 at 11:08 PM, tonylogan1 (27.54) wrote:

bump to 40 recs.

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#10) On September 29, 2009 at 11:20 PM, djkumquat (39.64) wrote:


checklist34, great comment (#1)!

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#11) On September 30, 2009 at 12:42 AM, Option1307 (30.66) wrote:

awesome post, thanks!

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#12) On September 30, 2009 at 11:51 AM, kirkydu (91.24) wrote:"> name="allowFullScreen" value="true">" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="560" height="340">

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#13) On September 30, 2009 at 12:08 PM, kirkydu (91.24) wrote:

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#14) On September 30, 2009 at 2:09 PM, devoish (63.65) wrote:

+1 rec.

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