{"id":35588,"date":"2016-08-23T10:44:16","date_gmt":"2016-08-23T14:44:16","guid":{"rendered":"http:\/\/www.technologyinvestor.com\/?p=35588"},"modified":"2016-08-23T10:44:16","modified_gmt":"2016-08-23T14:44:16","slug":"money-managers-can-lose-your-money-big-time-heres-one-story","status":"publish","type":"post","link":"https:\/\/www.technologyinvestor.com\/?p=35588","title":{"rendered":"Money managers can lose your money big-time. Here’s one story."},"content":{"rendered":"

Start with the fact that it’s hard to beat the market occasionally,<\/strong> but impossible to beat it long-term.<\/strong><\/p>\n

Move onto the fact that the easiest<\/strong> way to beat the market long-term is to take a handsome management fee — irrespective of how well you do, or don’t.<\/p>\n

Personally I have found little joy with money managers I’ve employed. All made more money out of me than I made out of them. (There was one exception.)<\/p>\n

These realizations have become widespread. Hence the huge influx of monies out of managed money into dumb, boring index funds, especially those low-cost ones run by Vanguard.<\/p>\n

Money managers and brokers tend to prey on older folk. On Sunday, the Business Section of the New York Times ran an amazing story of how a troubled Morgan Stanley employee managed to lose half his clients money, or about $50 million.<\/p>\n

Here’s the beginning of the story:<\/p>\n

\u00a0Morgan Stanley Neglected Warnings on Broker<\/strong><\/p>\n

A troubling call came in to Morgan Stanley’s internal hotline in May 2010.<\/p>\n

One of the company’s top financial advisers in Mississippi, Steve Wyatt, was struggling with medications and was “not sleeping, coming in 3 and 4 a.m.,” his assistant said on the call, according to notes taken by the person who answered the phone. Mr. Wyatt, a broker, was also trading client money “erratically,” the assistant said.<\/p>\n

Morgan Stanley is one of the top banks on Wall Street, operating one of the most sophisticated financial advisory businesses in the world. But when the call came in, there was little effort to help fix the problems, Mr. Wyatt’s colleagues – and Mr. Wyatt himself – testified in arbitration.<\/p>\n

This was not the only time Morgan Stanley did not heed warnings about Mr. Wyatt, who managed tens of millions of dollars of customer money, according to a settlement this week and documents from arbitration cases against him and the company.<\/p>\n

During Mr. Wyatt’s five years at the company, supervisors and compliance officers noted his problematic behavior and business patterns many times and failed to step in, documents show. Lawyers for his former clients claim that they lost about half their money, or around $50 million.<\/p>\n

Mr. Wyatt’s case, while involving just one broker, reveals the difficulty that even sophisticated companies can encounter in supervising their far-flung networks of brokers, who manage the retirement savings of millions of people nationwide.<\/p>\n

Wall Street companies have been expanding into wealth management and brokerage services, as profits from other businesses have been under pressure from regulations imposed after the 2008 financial crisis. Morgan Stanley now has nearly 16,000 financial advisers, one of the largest such forces of any company.<\/p>\n

Mr. Wyatt, who oversaw more than $100 million in client money, was fired in 2012, more than two years after that phone call and after more concerns were raised.<\/p>\n

In an interview, Mr. Wyatt, now 44, described falling into depression and having suicidal feelings, set off by the chaos of the financial crisis and its aftermath. He said his supervisors never offered help or expressed concern. “If they thought I was suicidal, if they thought I was depressed, nobody mentioned anything to me – concerned or otherwise,” he said.<\/p>\n

\u00a0You can read the full story here.<\/strong><\/a><\/p>\n

Housing: The Next Financial Crisis?<\/strong><\/span><\/p>\n

That was my headline yesterday.<\/span><\/a>\u00a0<\/strong><\/span><\/p>\n

Fact: Housing is huge — our largest asset class, and the cause of more financial crises than any other.<\/p>\n

You can’t predict financial crises. But — since I wrote yesterday’s piece, it’s amazing how many \u00a0pieces I’ve received extolling NOW\u00a0is the time to buy residential real estate.\u00a0Samples of what I received:<\/p>\n

\"BestTimeToINvestinRealEstate\"<\/a><\/p>\n

Says Market Watch (part of the Wall Street Journal,<\/p>\n

“Jeff Reeves argues that despite surging prices, the housing market isn’t headed for another bubble. See full story<\/strong>.<\/a>“<\/p>\n

\"SchwabNewsroom\"<\/a><\/p>\n

Harry’s comments on all this euphoria:<\/p>\n

This absolutely isn’t “the best time in history to invest in real estate.”<\/p>\n

It may actually be the best time in recent history to sell<\/strong> some of your real estate. This morning’s headline:<\/p>\n

\"newhomesales\"<\/a><\/p>\n

Sell at the top.<\/p>\n

Bill Gates is the richest man in the world. He’s worth $90 billion.<\/strong><\/span><\/p>\n

Where is Gates’s money coming from? According to ABC News of Australia:<\/p>\n

Most of it is not coming from Microsoft.<\/p>\n

The original (and self-described) computer nerd now owns just 2.5 per cent of the world’s biggest software company, the one he co-founded after dropping out of Harvard. Those shares contribute about $11 billion to his net worth.<\/p>\n

Mr Gates’ biggest asset is a company called Cascade Investment. It invests heavily in publicly traded companies and it is these cash cows boosting the Gates’s fortune.<\/p>\n

The world’s richest man is making big bucks from:<\/p>\n

+The Canadian National Railway<\/p>\n

+ The Strategic Hotel group (the owner of several Intercontinental, Four Seasons and Ritz Carlton branded hotels across the US)<\/p>\n

+ The not-as-luxurious waste disposal company Republic Services<\/p>\n

+ Deere and Company (think: John Deere)<\/p>\n

+ Water, hygiene and energy technology company Ecolab<\/p>\n

So, trains, tractors, hotel rooms and rubbish. If ever there was a lesson in diversifying investments, let it be Mr Bill Gates.<\/p>\n

Read the full story here.<\/strong><\/a><\/p>\n

Global Warming?<\/strong><\/span><\/p>\n

Continuing a string of global heat records, last month was the hottest July ever recorded, NASA said. But the agency added a wrinkle: Because July is always the hottest month of the year, this July was the hottest of\u00a0any\u00a0month since adequate record-keeping began in 1880.<\/div>\n
<\/div>\n
You can actually do something. A tiny village in England organized its 1,000 inhabitants to cut their greenhouse emissions. The results:<\/div>\n
<\/div>\n
They use clotheslines instead of dryers, take fewer flights, install solar panels and glaze windows to better insulate their homes.\u00a0The effort, reaching its 10th anniversary this year, has led to a 24 percent cut in emissions.<\/div>\n
Read the full story here.<\/a><\/strong><\/div>\n

Favorite lawyer billboard<\/strong><\/span><\/p>\n

\"Youdidit\"<\/a><\/p>\n

Favorite photo illustrating falling oil prices.<\/strong><\/span><\/p>\n

\"oil-is-getting-crushed\"<\/span><\/a><\/strong><\/span><\/p>\n

Favorite medical cartoon<\/strong><\/span><\/p>\n

\"Doctor_Disease_Insurance\"<\/a><\/p>\n

Favorite oldies\u00a0<\/strong><\/span>cartoon<\/b><\/span><\/p>\n

\"Unfaithful\"<\/a><\/p>\n

And finally, favorite recent New Yorker cartoon\u00a0<\/strong><\/span><\/p>\n

\"Butterflies\"<\/a><\/p>\n

\"HarryNewton\"<\/a>
\nHarry Newton, who loved this quote from NYTimes writer on the Olympics:<\/p>\n

On Day 3 of the 31st Olympiad, I sat on the couch with my 11-year-old daughter and watched the Hungarian swimmer Katinka Hosszu \u2014 a.k.a. the Iron Lady \u2014 roll out onto the pool deck like the assassin that she is.<\/div>\n
\"Katinka\"<\/a><\/div>\n
The woman is tough as nails, in her body and her mind. She knifed into the water; her back and shoulders exploded; she won gold in the 100-meter backstroke. Among her mottos is this:<\/div>\n
<\/div>\n
\u201cThe problem is not the problem. The problem is your attitude toward the problem.\u201d<\/strong><\/div>\n
<\/div>\n
Wonderful personal philosophy. Tell your kids.<\/div>\n