WHERE ARE THE CUSTOMER’S YACHTS?

“An out of town visitor was being shown the wonders of the New York financial district.  At the Battery, one of the guides indicated some handsome ships at anchor.  He said, ‘Look, those are the bankers’ and brokers’ yachts.’  ‘Where are the customer’s yachts?’  asked the naïve visitor.”       In 1940, Fred Schwed, Jr. published […]

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HOW TO TELL AN ADVISOR FROM A SALESMAN

The fastest growing channel in financial services these days are those advisors who operate both as registered investment advisors and as affiliates of licensed broker-dealers.   Advisors who are dually registered may (in theory) sell both fee-based advice and commission-based products.   This conflict has brought renewed attention to the ‘fiduciary’ standard as compared to the standard […]

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INVESTMENT ADVISORY AGREEMENTS – WHAT TO LOOK OUT FOR

What Are Investment Advisory Agreements? An investment advisory agreement outlines the legal relationship between a financial advisor and a client. There are two kinds of advisory agreements: discretionary and non-discretionary. Discretionary agreements allow financial advisors to make decisions on the client’s behalf. Non-discretionary agreements require the client to okay decisions before they are made. Clients […]

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WHY OVER-CONCENTRATION IN THE OIL & GAS SECTOR IS IMPROPER

Maintaining a diverse portfolio is one of the most basic principles of prudent investing. Unfortunately, when the oil and gas sectors were booming in recent years, many unscrupulous advisers encouraged an over-concentration of investments in this one area. Eventually, those sectors went into decline, and investors experienced out-sized losses exactly because of this. This was […]

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WHY LEVERAGED ETFS ARE DANGEROUS

      Exchange Traded Funds (ETFs) were created to create a more liquid market in sector funds. However, leveraged ETFs are designed to be tactical trading instruments, specifically not for “buy and hold” investors. Because of strict leverage requirements, even if you are correct about the direction of a market sector or the underlying investment, the […]

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PONZI SCHEME MADOFF RECOVERY MAZE

The lower interest rate environment is revealing a soft underbelly of Investment Scams and Ponzi Schemes.  What many of these schemes have in common is the breach of trust, and victims “holding the bag”.  In some cases, a partial recovery of the investment may be possible against a licensed investment professional.  In others, a small […]

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PONZI SCHEME ROUND-UP: 3 STORIES OF FAMOUS PONZI SCHEMES

Ponzi Scheme: What Is It? – We hear the term “Ponzi Scheme” a lot in the news, but do you understand what it means? A Ponzi Scheme is a type of investment fraud that promises investors a substantial profit with little risk. New investors generate returns for older investors, and so on, and so on […]

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PONZI SCHEME ROUND-UP: 3 STORIES OF FAMOUS PONZI SCHEMES

Ponzi Scheme: What Is It? – We hear the term “Ponzi Scheme” a lot in the news, but do you understand what it means? A Ponzi Scheme is a type of investment fraud that promises investors a substantial profit with little risk. New investors generate returns for older investors, and so on, and so on […]

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SHIP OF FOOLS

A recent article called “Ship of Fools” describes the Madoff scandal and its many facets. The article indicates that the scams are avoidable if one asks the following questions. 1. Who is the auditor? Have you ever heard of them? Do they have other reputable clients? Are they independent of the hedge fund? 2. Who […]

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SYSTEMIC RISK AND BLACK SWANS

“Black Swan” events such as Bernard Madoff Ponzi Schemes, earthquakes, tsunamis, have seemingly conspired to compel us to take our eyes off the “ball”. The ball, in this context, may be Financial Services Regulatory Reform, and Health Care Reform, that all agreed were so necessary. Under normal market, negative events generally occur randomly and most […]

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