Who can you trust? What can you trust?
These questions seem more relevant than ever before. At one time, nobody would think of investing in something they didn’t thoroughly understand. Those with the ability to invest would only do so based on experience and/or expertise. If they didn’t have the knowledge then they’d either gain it or stay away from the investment.
As the markets grew, “experts” emerged offering advice. Soon advice became offers to manage the funds of others. As this dynamic grew, many became accustomed to deferring to the “professionals” for their financial decisions. Mutual funds, hedge funds and account managers became a common means through which many became wealthy.
To be clear, many still do. There is nothing wrong with using a good financial manager. But, isn’t that the point? How many managers are actually good at investing? Many of these self-proclaimed experts receive handsome fees on each trade you make, whether you see gains in your portfolio or not. And, as has recently come out in regard to Goldman Sachs, sometimes the firm is actually betting against you.
In light of these shenanigans, it behooves investors to perform their own due diligence. We should each strive to truly understand every investment to the best of our ability. Perhaps we’ve found an outstanding investment guru to manage an account for us. But we should at least strive to understand the decisions made, why and keep some control over how our account is managed.
However, sometimes we do all we can to understand and still fall short. This is because, every once in a while, firms simply do not allow us to know the truth. Numbers are forged, left out or downright deceptive. Events are brushed over. Issues are swept under carpets.
According to a recent law suit being filed on behalf of Bank of America shareholders, this is exactly what happened in the purchase of Merrill Lynch. According to the accusation, BofA did not accurately represent Merrill’s numbers when the vote was set before the shareholders. In other words, they voted for debt they didn’t know existed. The resulting vote was basically an agreement to saddle shareholders with debt, which eventually helped catapult BofA into a bailout, costing tax payers another $20 billion. You can read the details here.
Maybe you’ve been working for GM for many years, building up a strong retirement to carry you through your golden years quite comfortably. Perhaps you haven’t set aside any other savings, so handsome was your agreement with your longtime employer. You’ve worked diligently, expecting a long-term mutual commitment. Then, as you head out the door on your last day, you receive this notice.
General Motors Co will cut nearly a quarter of its U.S. pension obligation by transferring the management of its pension plans for 118,000 white-collar retirees to a third party and offering lump-sum buyouts.
Of course, this doesn’t mean you shouldn’t work for a company that promises a pension. It is a good reminder that we each need to prepare for our own retirement. It’s agreed that working for a company that promises pensions is preparing for our own retirement. But it’s become apparent that we cannot count on anyone else to provide for us. We must do so ourselves.
Navigating these waters can be tough. But it is necessary. This is one of the reasons we strive to get people to consider a foundational position in precious metals. It’s a substantial investment that you can literally hold on to. It can’t be mismanaged. It can’t go bankrupt. It doesn’t pay dividends or perform, so you don’t have to worry about either of those depreciating. It holds value, period. It almost always grows in value during hard times, but never loses value completely.
Don’t trust my word for it. Do your own due diligence and study true money. If there’s anything we can do to help, send us a note.
For your prosperity,
J. Keith Johnson
The Gold Informant