Financial TV news - treat with caution

While I admit that I enjoy quite a few financial news programs on TV I would like to add a word of caution - especially for those investors that do not have the time to make financial analysis and research their main focus during an otherwise busy worklife.

Don't rely on regulators alone for your protection!

When firms point out that they are regulated you should not blindly rely on this as your primary source of protection. Regulators are created by politicians and are often (too?) close to the industries they are supposed to police. (Bloomberg)

Bank deposits may be expropriated in Eurozone

The introduction of a European deposit insurance scheme could lead to the expropriation of savers in countries who end up as net contributors to the scheme warns former member of the ECB Ottmar Issing. (Financial Times)

Don't complain - do your research!

Too many investors - even professional money managers who should know better - chase fads and overpay for their investments. A quick look at the key numbers behind the Zynga should have sent out warning signals and it is pointless to complain about insiders who unloaded more than half a billion dollars worth of stock in a secondary offering last April.

Anti-Money Laudering measures bark up the wrong tree

Prevention, detection and prosecution of money laundering has become big business during the past 20-30 years. And it will keep on growing and feed an ever-expanding army of regulators, compliance officers and assorted consultants. By definition the term money-laundering can be applied to nearly all business transactions and it taints everyone - even innocent parties - that is involved in commerce. For who can with 100 percent certainty say that someone he transacts with is not in some way associated with a proscribed activity? As re-iterated on this site for a few times money-laundering legislation is only a get-out for poor legislation and poor government. If the crime (and quite a few of the proscribed activities do not rank as crime in everyone's eyes) would have been prevented, detected or prosecuted, or even better, bad laws would not have been enacted, the need for anti-money laundering would vanish. But it suits today's political class to create a climate of all-pervasive supervision and fear among the citizens they are supposed to serve.

How safe is your (US) Futures Broker?

Atlas Ratings is worth checking if you are nervous because of the failure of US brokers during the past year. You certainly do not want to rely solely on regulators.

Investment fees can cut returns by up to one third

While most investors tend to look at performance and try to catch the next hot trend here is a healthy reminder that the aspect of fees that are charged by investment managers and related service providers should not be neglected (CNBC). When up to one third of the investment returns (or in the worst case of zero or negative performance one third of original  investment) can be be lost in these expenses we are talking about serious money and careful monitoring is essential for investment survival.

Minneapolis Doctor is defrauded in $7 Million Scam

Just another example illustrating that due diligence is essential when selecting a money manager. Full Story here (StarTribune)

Why is your Financial Adviser offering 'Alternatives'?

When being offered any financial product investors should always make sure that they really understand them and are not swayed by the sales pitch they get from a financial adviser. While the inherent risks in any product should be the main consideration there is also a need to have a good look at any fees associated with the product.

Advisor Rankings - treat with caution

Barron's Magazine regularly publishes a list of  'Top Financial Advisors'. While this list covers only US-based advisors it creates more questions than it answers. First of all it should be no surprise that there is more than a hint of self-promotion as advisors apply to have their performance reviewed by the magazine. While we value Barron's highly and enjoy reading it for more than 45 years (We hope our age is not frightening readers away) the editors are faced with a major problem when tackling the question of actual investment performance - not performance as measured by assets under management (or advice). The latter measure is used by Barron's as a proxy for good performance - more assets should normally be a sign that the advisor is doing a good job. But there are limitations to this imputed correlation and investors would be well advised to have a look behind the glitz and glamour of a good marketing presentation and have a close - and impartial - look at the performance, risk and fee levels associated with any investment advisor they entrust some part of their investment funds to. On a closing note we can but admire the superhuman skills of some of the advisors listed as they seem to be able to handle 1,000 and more accounts. In that respect they really deserve a 'top' rating (Honi soit qui mal y pense, as the Queen would say)