Questions

A few readers of this blog have asked me why I haven't been more specific in my posts, regarding investment picks. It's a regulatory issue--it is a slippery slope to offer specific stock recommendations in an open forum, even when properly licensed by the SEC. This prevents the notorious "pump and dump" schemes, where hucksters attract the vulnerable into questional stock schemes, only to pull the rug from under them, leaving them holding the bag, as the stock crashes. It's hard enough trying to make money without the added pressure of snake oil salesmen.

And sometimes the regulation is obsolete. For instance, the SEC forbids licensed financial planners from implementing home equity management strategies, deeming them risky apparently. Quite the contrary: home equity management can be the most conservative strategy for wealth-building, assuming a mortgage is preferred debt (deductible) and investments compound in a tax-free positive arbitrage scenario. A white paper by the Chicago Federal Reserve Bank explicitly addresses this, theorizing most Americans are building equity inefficiently by making extra principal payments on their mortgage.

I will offer some insight on what I have purchased or sold, and my investment theses, but with disclosures and disclaimers for readers to consult with their financial advisors.

I would further caution readers to look beyond qualifications and professional accreditations in sizing up financial professionals. After all, most professional advisors lost money for their clients in the last decade--in some cases, huge losses, despite the latest hedging techniques and portfolio theories.

If you're not comfortable with them, or if you don't understand what services they offer, move on and find someone you are comfortable with. Make sure your expectations are aligned on the criteria for YOUR success. Many people lost millions trusting their money with Bernie Madoff, because they didn't perform due diligence and blindly trusted someone who turned out to be a crook.

The best way to prevent becoming a victim of fraud or of the markets is to raise your financial IQ. Personally, I would never invest in something unless I knew everything there was to know about it. I would apply the same caution before considering marriage. But I understand most people don't have the inclination or capability of understanding investment concepts. These people need to find advisors they can trust. Getting referrals, and doing some cursory investigation is a pre-requisite, but understand that even that won't always prevent embezzlement (see Madoff as a glaring example), negligence, or just asset bubbles bursting. As in life, there is no free lunch--you must do your homework. How much is up to the individual.