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July 09, 2009


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"“All great failures are moral failures,” Fred Smith Zig Zigler’s mentor Fred Smith points out that anytime you see a great failure, it is not because of their intellect, but because of some great moral failure. The current economic crisis is a perfect example of this. Greed and instant gratification are the two primary reasons we have a crisis right now. Isn’t it morally wrong to knowingly encourage someone to take a huge risk? Isn’t it morally wrong to take a huge risk for no other reason than instant gratification?" - Seven Success Keys by Tom Zigler

As the poet Henley once said, " A man with a briefcase can steal more money than a man with a gun".

david C. - this reminds me of a quote I heard. Around the time of his deportation to Italy a mobster Lucky Luciano described a visit to Wall Street. He said "A terrible thing happened. I realized I'd joined the wrong mob".

The one thing I don't like about the beginning of this article is that Peter, the author, seems to allude it's ok to steal from the rich. That it's somehow better than stealing from the poor.

May I remind you that a fair number of people who come here are defined as 'rich' even though they may feel like they are in the middle class. These people worked as hard to save their money and don't deserve to be scammed any more than any other group.

Maybe I over-read into this and if that's the case, please accept my apologies.


It all comes down to your point #2: be skeptical, very, very skeptical, of "too good to be true" and get-rich-quick schemes.

Worst financial problems I've ever seen in friends and relatives all came from them buying into some "inside information", "sure-thing", "easy-money" type deal (this includes those who took out home equity loans they couldn't pay back to buy vacations they didn't need).

A corollary: Everyone should post a sign on their bathroom mirror that says, "you are not an unrecognized financial genius!" Stop trying to outguess the market, unless you are a super-experienced, educated, linked-in, full-time fund manager. And even then, you probably won't do it for long. I wish I had a dollar for every guy at the bus stop who insists on sharing with me how he's figured it all out, and he's sure to get rich on a stock tip or his own personal market theory.

There is another factor in the Madoff scandal that doesn't get discussed and that is the ethnicity factor.

My daughter has been married for many years to a wealthy Jewish attorney and my wife and I have got to know his extended family very well. One thing that I have noticed that is not present in our own ethnicity (100% English) was that Jewish people tend to put great trust in the honesty and integrity of people from their own ethnicity and seem to prefer dealing with them whenever possible.

This is not a problem 99.99% of the time but Bernie Madoff was the proverbial "Bad Apple" in the barrel and was able to pull of his outrageous scheme because his clients trusted him implicitly, especially with his rise to fame and position in the NASDAQ and local society.

The England that I grew up in before emigrating in 1956 was made up of almost entirely white, anglo saxon, protestants (i.e WASPS) so almost everyone that you dealt with was part of that group. Since coming to America, which is of course a melting pot of people of all races and ethnicities, it's impossible for most people to steer all of their business to people from their own background, so race and ethnicity are rarely a factor in business relationships. In my case I chose Fidelity Investments to keep my financial accounts primarily because of their unblemished reputation as the oldest and largest mutual fund company. I could have just as easily gone with Vanguard, American Century, or T. Rowe Price who also have fine reputations.
Since I make all of my own investment decisions I have also never had a financial adviser choose investments for me.

The investors that I feel the most sympathy for are the ones that invested in the so called "feeder" funds that were quite legitimate but unknowingly to their investors were feeding the investments to Bernie Madoff.

Interestingly Fidelity has 19 mutual funds that have an annual compound rate of return of over 10% since 9/1/88 (when the database that I subscribe to started). However not one of these 19 funds has anything anywhere near approaching a steady rate of 10%/annum over these 21 years - in fact the maximum drawdowns of these 19 funds range between -44% and -85%. There is no investment that I am aware of that has provided a very steady return of 10%, year in and year out, with low single digit drawdowns.

The proverb I learned many years ago was "If it sounds too good to be true, then it probably is".

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