Wednesday, April 28, 2010

Aw! Crap!

by Dick Mac

When the economy collapsed under George Bush and the market reached its nadir just over a year ago, my family made a decision to invest directly in securities, instead of investing in funds.

For those unfamiliar with the difference, there are (generally) two vehicles for consumers to trade in the market, and what follows are very pedestrian (though I believe accurate) descriptions of these two choices:

Funds. Companies like Vanguard, Fidelity, and many others, collect money from investors, pool the money together, and invest in securities and/or bonds. The increased buying power allows fund managers to make bigger (and better?) investments, and remove the onus of securities research from the individual investor. In return, the investor is often shielded from some market fluctuations and reaps the benefit of the fund's greater purchase power and research teams. Most funds specialize in one area (sector) or another. There are energy funds, corporate bond funds, balanced funds, international funds, etc.

Securities. Companies like Fidelity, eTrade, and many others, provide trading services, that allow consumers to buy and sell individual securities. These direct investments in individual companies generally expose an investor to more risk; but also provide a vehicle of potentially more profit. A consumer can invest directly in Ford Motor Company, Microsoft, 3M, and any other publicly-traded corporation. If that company pays a dividend, the investor collects that dividend as it is paid-out (often quarterly). Also, in a perfect world, the value of the stock continues to increase.

So, this time last year, stocks were at their lowest point in many years, and it became obvious that this was the one opportunity we would have, as working class people, to get into the market. We knew about the same successful companies that all Americans know about, and we started learning about other companies. We read every day about the economy and the way the credit crunch was affecting each industry. We then sank a chunk of change into the market.

Some investments were great, and some were total dogs.

I was reminded of our bad investments yesterday when I heard the text of an email from a Goldman Sachs executive who wrote that the investments they were creating, selling, then betting against, were not the best products available in the market.

Goldman had created an investment vehicle named "Timberwolf" and the executive wrote: "Boy that Timberwolf was one shitty deal"!

I look at some of my family's investments and feel the same way. We are lucky, though, because our shitty investments were of our own doing; we didn't have an investment banker selling us an investment she knew would be shitty, and that she would be working to defeat, leaving us holding the shitty, and eventually worthless, investment.

Sure, we've made shitty investments, but this move by Goldman is much shittier than any investment we've ever made.

I think that should be the new populist slogan for Goldman:

"Goldman Sachs, since 1869: Shittier Than You!"

"Goldman Sachs, Shitty since 1869: You can take that to the bank!"

"Goldman Sachs, bringing shitty investments to the market since 1869."

"Looking for a shitty investment? Let Goldman Sachs take you to the cleaners!"

Have a nice day!

Senate showdown puts Goldman's defense on display at the Washington Post site.

1 comment:

ckb said...

"Goldman Sachs -- That's Life In The Big Shitty!"

How vile can a company get, to knowingly let someone place their hard-earned savings and their trust in investments you know to be, well, shitty. That's reprehensible.