The "Failure to Supervise" Con:

Well audit time is here again...somewhere...and whether it is the securities business, or virtually any audit of a commercial enterprise, it is important that young employees understand the "failure to supervise" con, or maybe it is a movement or mode of business.... As a young man I worked in a public accounting firm...I well remember the young students that were attending a private two year accounting school that was attended by many young men who had returned from the Vietnam War and were going to school in the morning and working in the accounting practice in the afternoon...no blue bloods here...and many days they were at the clients offices doing their work... Some of these students, who were in introductory classes, were asked to participate in "audits", that were to my view of it, very underbid...in fact, I felt that the fees charged were pretty amusing considering the amount of work that was expected...and yes the students were rushed, and rushed to get the audit done... Whether it is on Wall Street, or Main Street. the strategy of business done at the top of organizations is many times organized so that problems are not found....and senior staff of these corporations just smile... On Wall Street, there are strict rules for senior "principals" who are charged with supervising the actions of brokers...and I remember during the 1980's my boss reviewing my trades with me to understand what the trade was and why it was appropriate for my clients.... Several months ago a major Wall Street firm was fined 5,000,000 for failure to supervise its staff in a whole multitude of initial public offerings...and indeed if one just looks over the press for the past 10 years there is just one fine after another...seems like nobody has learned, or maybe nobody wants to change....or nobody has any intention of changing, and that this is the nature of the game...intentional "Failure to supervise." This is not "Hogan's Heroes" and these are not "Sargent Schultz" who always seemed so funny when he kept saying..."I know NOTHING,,,I see NOTHING"...What every investor needs to know is that this failure to supervise is a critical orange alert matter....and it is important to take action...

The Olympic Spirit...Focus on the Gold

A lifetime of investing will give each individual a hint of what the best investments were..in the past tense...think back to 1900 or so...and what were the companies that were in existence that are still around and prospering...ok..just start in 1930....Maybe of all the 30000 companies that one can see in the newspapers today, maybe GE, F, GM, come to mind....in as far as indexes go, maybe the SPY, the standard and Poor Index comes to mind.... I have put a few ideas on a 3in by 5 in. card....and when it comes to high quality stocks with high quality dividends or an index that can survive over the next 30 years after I retire....the ideas that are available neatly fit into the 3x5 card...no rocket science...no long Harvard lawyer stuff...pretty simple...the real effort in focusing on quality, is beating off the riff raff slop that comes to you with exciting opportunities....turn off the tv...keep it simple....enjoy.

Never Trust an investment that has the word "Trust" or "Royalty" in it.:

Ever since the American people faced the crash of 2007, by the way which Bernanke recently bragged was even bigger than the crash of 1929...a fact that he was a little late in recognizing since every man, woman and child in America knew this...anyway...investors after the crash of 2007 faced the 1% interest rate on their savings were lured into investments that promised 10,12,13,14% interest through the magic of "fracking"....or something like that...maybe it was mispelled: anyway....those investors have suffered terrible losses since these "Royalty Trusts" were really "wasting" assets, and the investors found that their investment got "wasted." So the rule..."If the investment seems too good to be true...it probably is."...or "If they smile and promise you the moon, they are lying."

Champions Manage Their "Losers"

If you follow the Wall Street pundits, you know that every authoritative pundit will say that the trick is to "Manage Your Winners." Any person who has actually traded or invested knows that this is bull. Any two year old can take gains...that is the easy part...What is left after the gains have been gotten, is the losing positions...And the solution to those losing positions is the difference that makes one a champion... Directly facing the losing position, and taking additional options positions or stock positions to mitigate the potential loss is what distinguishes rookies from successful investors. The worst of all worlds is to DENY or COVERUP the losing position...Ah the memories of the famous "London Whale" saga....Those who cover up or deny when working for a trading firm end up in shame or jail or both. Champions manage their losers.

A bit on "Hedging" and "Trading":

Most all products produced for international destination points are hedged for price and or currency risk....Hedging is done as a Insurance risk matter, and a routine matter, and can be found in many sourcing chains of command.... For example, the notional value of one (1) contract of coffee is about $60,000 and a futures call placed daily would over a month would create futures hedging of the amount shipped of 1.200,000....When a 90 day period ends and the futures are rolled to the next period, the value could reach 3,600,000 as far as notional value...the purpose of the future premium is to hedge the risk of coffee price rising, and this is hedged since if coffee price rises, the future rises with it.. Coffee futures trading is the most volatile of all futures....The risk of trading these actively and intraday is enormous, and the risk is bourne by the firm's capital...traders earn 200K plus percents of profit....They are trained and may have extensive registrations as brokers etc ...In short---trading is not hedging...Different risks...different temperament....

So you want your own capital back and pay taxes on it?

It has been pretty sad over the past 5 years or so as high dividend stocks have preyed on the desire of senior citizens to get a fair return on their hard earned savings...it used to be that a bond book, and a cd card...ya kind of like a holy card, were kept at the bedside of seniors nationwide....Every since the crash, and the easing of the money supply, and the 1% yield found at banks....seniors have been scrambling to find decent yields...and if they went to attractive stocks, they might find stocks that had yields as high as even 12%....but if seniors and investors had looked closely they would have noted that in the statistics of the company profile, the earnings of the company could not cover the dividends disbursed, and eventually when the company cut the dividend, the stock plunged....but no worry, the investor still had to pay taxes on the dividends paid....so all in all...a lose-lose deal...A word to the wise...if it looks too good to be true...it probably is...and as a p.s.....never purchase any investment with the word "trust" in it...as in "royalty trust."

Postscript: The Wolf of Wall Street

The other night my wife and I watched the movie "The Wolf of Wall Street." I had worked on Wall Street back in the 1980's with E.F. Hutton, and just wondered how accurate it all would be.. After the movie was over, my wife just asked me quietly: "So was that the way it was?" "Yup" I replied...that was exactly the way it was....but I do recall I had a little problem driving the Lamborginis.... That's my story...and I am sticking to it.

"The One trick Pony"----

Years ago when I worked for E.F. Hutton, and we all know that when E.F.Hutton speaks, people listen...there was a technical guru that everyone listened to and he did predict one crash...and was famous....and after he left the firm, there were two additional women who were the prophets that hoped that they would be the next profits of doom...but never were...and after them...came all the rest.... Tons of prophets of doom, that have wonderful daily ideas for profit, but really they hope...hope...and hope squared that they might be able to look foreward to predict the next really big crash...but alas...

"When things go Up, Up, Up"----a true story

Back in 1986, I worked for E.F. Hutton....and was just getting comfortable in the job, when I added a client who wanted some growth for his portfolio...and I was grateful to have his business...and so I made a recommendation for a stock for investment, and he invested a couple thousand dollars... About a week went by, and I noticed that due to some unusual news story, the stock had doubled...I was just stunned...and I called the client and he said to sell and take the profit...so I did... Between calls, I asked a senior broker about what to do if the very first trade a client makes doubles...what to do next... She replied that this was a very bad way to begin a financial relationship...because the client thinks that this is the "norm." The problem is what is the next idea that will in any way follow the first idea.... "Things go up and down" she said...."When things go up to the moon, usually they come down just as fast...." I think a lot of her words lately...as markets go up, up, up, and where main street since 2007 has not seemed to make much progress....and thus I just remember her words...and plan accordingly....