Integrity Matters
March 26, 2003

Check track records before investing cash

Question: (E-029)
Over the past several years, I have watched our economy sputter. My wife and I watched as our big dreams for early retirement evaporated. We are partly responsible for the difficulties. We, no, really I am mostly the one who pushed for higher returns on investments. We kept reading about these high-technology projects that had tremendous valuations for their stocks. I insisted that we jump in and enjoy the returns. When things began to fall apart, the advice my wife and I received was to “stay the course; stocks are a long-term investment.” We trusted our investment advisors. We lost about 60% of our funds.

Was our tremendous loss related to the integrity of those who sold the investments and counseled us? Was this an integrity issue for those who were the leaders of the companies in which we invested? I am angry, embarrassed and a lot poorer. Whose integrity can one trust?

You feel taken advantage of, and there are legitimate reasons for your feelings. Here is the irony and the sad truth of a seemingly modern and wealthy society: Long ago, in the Middle Ages, many of the leaders of the Catholic Church kept language and education away from many deserving and capable people. As a consequence, freedom was kept in check and a certain theological aristocracy operated pretty much as it chose.

The situation today is remarkably similar. Medieval priests reading and speaking Latin have been replaced in our era by balance sheet wizards and magicians of money. They are well trained in these modern times to speak in a language calculated to be beyond the “average” wage earner whose dollars have disappeared. Financial power, consolidated in the hands of the few -- no matter how well educated -- can too easily place personal greed and insider loyalty far above integrity.

Encouraging beginning or unsophisticated investors to participate in these inflated valuations, fabricated by members of the “financial wizards club,” is wrong. Keeping them in these inflated transactions long after they should have exited is borderline corrupt. It may not be illegal, but most assuredly it is immoral. Too often the “off the street” investor was losing a small family fortune while those in the know, who invested early, were taking high profits and bailing out.

Obviously, there are honest professionals in finance and investments. The very best way to learn about advisors (financial and others) is to review their track records with those who have worked with them before. History is often an excellent way to predict or at least better understand the future.

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