Storm Financial Group

[maccka]

It just seems to get stranger and stranger.

At the Cairns session it was reported in a news article that Mr Dalle Cort "blamed the collapse on the ''product failure'' of margin loans. We couldn't possibly know,'' he said. ''The data coming through from the banks was bizarre.''

Yet in the same report another planner from a separate group stated that ''We did have CGI (Colonial Geared Investments) loans, and we did have managed trusts and in November, as with a lot of planners, we were really very, very actively managing our margin loans."

The implication being that the data coming from CGI to other planner groups was "clean" and able to be acted upon to manage margin loans. The other implication is that those margin loans where the planner had the authority to act, while busier than a one-armed paper hanger, did but Storm didn't.

That other planner is also reported to have said "It's not that the product failed at the end of the day, it's that the strategy failed.''

Hello all,

**SIGH** I was at both the Cairns and Brisbane sessions and have recordings that I took of every bit of testimony that was given. They were two VERY long days.

I have to say that I have found it very frustrating over the past few days to see the way some of the media have reported these sessions. Sometimes the "quotes" you see attributed to people in the news article above actually aren't true quotes. Words are left out by the journalist (in this case that doesn't necessary change the total meaning but in others it does). While that is not particularly an issue in the article that Judd is quoting here it definitely is in a number of the other articles that have been linked in this forum. In fact not only is misquoting a problem but also the fact that much of the context is removed from the quotes which changes the meaning of their quote.

After checking the recordings I can pretty much confirm that Dalle Cort did say what Judd reports above.

In talking about what SF was trying to do to help the clients while the market was falling and the problems SF was having with data.

Dalle Cort - "For a period of time - for over a month - that never changed. So how could we manage something we couldn't manage?"

More conversation regarding what SF was doing. Nothing that particularly offers much information - a brief mention of signing a piece of paper so when data did get back to being correct they could act.

Ripoll - "So you really didn't know at any given point what was happening with that particular product."

Dalle Cort - "Not that I didn't know. We couldn't possibly know. Because the data coming through from the banks was bizarre. It simply wasn't showing what was real."

Williams - "So you're saying that the monitoring of the market coming through from the banks simply wasn't keeping pace with the fall of the markets."

Dalle Cort - "Absolutely! Without a doubt. And it sickens me that they continually state that there was no problems with their systems."

After checking the recording (it will be backed soon by Hansard records) for the other planner from a separate group I can tell you that the financial planner Judd talks about here is Ms Joanne Tuck (I believe it was) and she gave the evidence about managing the margin loans of her own CGI clients. She did say that they were very, very actively managing the loans.

Regarding the data for CGI Margins Loans she said "We would go on to the internet and look at the margin loan balances. We would go on to the internet and value the portfolios ourselves."

She didn't actually say that the product didn't fail. She said "His [referring to Dalle Cort] comment that the product failed at the end of the day. Well I would say that his strategy failed at the end of the day".

She also admitted that her business was owned by a big bank. "My business and my partner's business is actually licensed by a licensed securities dealer who is owned, dare I say it, by a big bank". It would be interesting to know "which bank?".

A question I have been wondering about in the days since hearing this on Tuesday - If she was able to access clean data from CGI why did she need to go to the internet and value the portfolios by herself?

She admitted herself that some of her evidence seems like sour grapes but then suggested that she felt they were bloody well worth investigating.

tired
Maccka

 

[Solly]

"Storm founder's apology 'overdue' "

"The Storm Investor Consumer Action Group believes an apology from the founder of the failed investment group Storm Financial has been a long time coming.

The action group's co-chairman, Noel O'Brien, says while Mr Cassimatis did apologise, it was long overdue.

"I think he's been a little bit too quiet for a little bit too long," he said.

"Okay, he's putting a heck of a lot of blame on the Commonwealth Bank and that's justifiably so, but I think he may have let himself and his former clients down by not being out there more for them earlier in the piece.

More from Penny Timms on the ABC;


http://www.abc.net.au/news/stories/2009/09/04/2676312.htm

 

[Judd]

While it is true that people should be responsible for their own financial affairs and outcomes, it is also true, to my mind, that you need the mind set to be curious about those issues. If you haven't got that "spark" it is difficult. I consider myself fortunate that I am curious about money amongst other things.

From what I have read, most Storm clients simply did not know how to go about things. They worked, did shifts, were on duty at sea 24/7 for a few weeks or in East Timor, Afghanistan Iraq. Shagged out. Went home to family. Normal stuff. Highly unlikely that on arriving home they sat down and explored Elliot Wave theory, Relative Strength Indicators or what the market is doing to day. Closest thing they got to it was watching the talking heads on TV or reading the finance section of the newspaper.

So in an attempt to improve their family's lot they sought advice. Sure, the best thing they could have done was absolutely nothing. I have no sympathy for those who had $4m in investable assets and proceeded to lose the lot through Storm. Unless you won Tattslotto the day before, you would need some financial acumen to achieve that amount. However, most didn't have that amount.

As most referrals to financial planners is by word of mouth then that is where a lot went. Why? Read "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay first published in 1841. To go against the herd is darn difficult.

Yep, some blame still rests with the investors in my view as after all they did sign the documents and write the cheque. But the blame does not all rest with them.

maccka, thank you for the clarification.

 

[maccka]

The reality is that Storm didn't need to rely on data from CGI. When monies are invested in an index fund, it's a very simple matter to calculate an estimated current value (by the minute if needed) and hence the LVR - it's not rocket science, and they supposedly had very sophisticated software.

Manorleas

Actually Manorleas I think you will find that they did need the data. As I understand it if a fund is suspended then there is no value for the units and therefore there is no way to calculate a loan to value ratio. If there is no value how can you compare a loan to it to get a ratio?

Maccka

 

[Solly]

"CBA blames Storm for margin call delays"

"Commonwealth Bank has blamed Storm Financial for not passing on margin calls to its investors despite admitting the bank did not contact the customers itself.

Appearing before an inquiry into the collapse of the Townsville-based financial planner, CBA also admitted information it supplied Storm about the financial health of its customers was not completely reliable."

More from AAP in the SMH;

http://business.smh.com.au/business/cba-blames-storm-for-margin-call-delays-20090904-fb8u.html

 

[Solly]

"Sales and bonus culture directly linked to collapse of Storm: FSU"

'The Finance Sector Union (FSU) has called for an end to the sales and bonus culture that it said was directly linked to the collapse of Storm Financial.'

More from Corrina Jack in Money Management;

http://www.moneymanagement.com.au/article/Sales-and-bonus-culture-directly-linked-to-collapse-of-Storm-FSU/497037.aspx

 

[maccka]

As most referrals to financial planners is by word of mouth then that is where a lot went. Why? Read "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay first published in 1841. To go against the herd is darn difficult.

...

maccka, thank you for the clarification.

Judd you are welcome.

With regard to going against the herd you might be interested to hear that on Tuesday, in Cairns, the committee heard testimony (in the open mic session) of how the "network nature" of word of mouth has devastated whole families and communities leaving them with very few reserves (financial or emotional) to deal with this tragedy. It is something that I believe really hasn't shown up much through the submissions although it was mentioned in one of the submissions from a couple of Storm clients.

Maccka

 

[Monario]

There were many that could smell the stink of it all from driving past their office, you just had to open your eyes. I find it incredibly hard to believe everyone is that financially naive. While Storm investors were all selling in Nov 08 - Mar 09 I was buying. While you guys were all buying in 07 and 08, I was holding, while I have never been tested I am sure I fall somewhere in the middle of the IQ bell curve, so I am not particularly mentally adroit. It's not that hard and if it is, stick it in the Bank.

Where, where, where were you Oh great one when we needed you, You could have been the great mesiah we needed to lead us poor stary cattle away from the lions den.

Once the Politicians get involved you know it's a sideshow, as was pointed out before this even started.

You should jump up at the next hearing and let Bernie know of his folly, I will chip in and shout you your expenses for the trip if you like!!

The only difference between Madhoff and EC is that he genuinely believed his own bullsh*t, while Madhoff new it was a con and that's why he'll be "ok" and Madhoff is in jail. Same con, different clientele.

EC is a pathological liar, its not hard to see that, NOW, once again where were you when we needed you oh great one!!.

Serioulsy trevor, how have any of the comments you made here contributed postively to this forum?

I just love the explotation of hindsight some wise people use!!

 

[DocK]

While it is true that people should be responsible for their own financial affairs and outcomes, it is also true, to my mind, that you need the mind set to be curious about those issues. If you haven't got that "spark" it is difficult. I consider myself fortunate that I am curious about money amongst other things.

From what I have read, most Storm clients simply did not know how to go about things. They worked, did shifts, were on duty at sea 24/7 for a few weeks or in East Timor, Afghanistan Iraq. Shagged out. Went home to family. Normal stuff. Highly unlikely that on arriving home they sat down and explored Elliot Wave theory, Relative Strength Indicators or what the market is doing to day. Closest thing they got to it was watching the talking heads on TV or reading the finance section of the newspaper.

So in an attempt to improve their family's lot they sought advice. Sure, the best thing they could have done was absolutely nothing. I have no sympathy for those who had $4m in investable assets and proceeded to lose the lot through Storm. Unless you won Tattslotto the day before, you would need some financial acumen to achieve that amount. However, most didn't have that amount.

As most referrals to financial planners is by word of mouth then that is where a lot went. Why? Read "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay first published in 1841. To go against the herd is darn difficult.

Yep, some blame still rests with the investors in my view as after all they did sign the documents and write the cheque. But the blame does not all rest with them.

maccka, thank you for the clarification.

A reasonable and probably fairly accurate summary of a lot of ex-stormers. Most of us are quite willing to accept some blame (and have been feeling a lot of guilt, amongst other emotions). One of the saddest aspects to the whole tragedy is that most of us probably thought we were being responsible by going to a reputable financial planner and dealing with reputable banks.

I bet most of us are now "sparked-up" and a lot more curious about the inns and outs of waves/indicators/oscillators/indexes ad nauseum than we used to be

 

[maccka]

Hi Ya Shibby!!!

Another point to remember is that the Maquarie margin lending book was of similar size to CGI - there was over $2billion in margin loans! I understand that once the Margin lending book reached a certain size, the interest rates on the Storm corporate loan facility (used for building purchases etc) became zero. Pure conflict of interest!!!

Hi Carey,

What happens to the economy when someone tries to sell up the equivalent of $4m (CGI + Macquarie) lending all at once as people are moving to get out of their loans?

Maccka

 

[Solly]

Just got an unsubstantiated message to say that at the Inquiry today in Sydney a CBA representative said that in future CBA will ensure that they will contact clients directly who are in margin call, instead of relying on the advisers.

Will have to wait for the transcript for the exact words that were stated for verification.

 

[Garpal Gumnut]

Just got an unsubstantiated message to say that at the Inquiry today in Sydney a CBA representative said that in future CBA will ensure that they will contact clients directly who are in margin call, instead of relying on the advisers.

Will have to wait for the transcript for the exact words that were stated for verification.

It makes sense mate.

Financial advisers are dills, better suited to working on the roads as stop go people but they'd probably stuff that up as well.

gg

 

[Monario]

Carey, or anyone else for tht matter.

Could you throw some light on the ramifications of the advisors selling there personal portfolios down, but not advising clients?

Dont these so called advisors have a duty of care, i fthey were saying one thing but doing another, why can not the individual advisor be taken to the cleaners?

 

[Solly]

It makes sense mate.

Financial advisers are dills, better suited to working on the roads as stop go people but they'd probably stuff that up as well.

gg

gg, for some reason I can't come up with a caption so I'll just provide the link...

http://www.newspix.com.au/Packages/ViewImage.aspx?id=732124

(with apologies to Rupert)

 

[Judd]

Don't sweat it, Monario. Although he is a tad harsh, Trevor_S has made a valid point about people needing to take responsibility for their own financial matters. Other aspects could be considered contentious and open to debate.

However, along with the best of us, since finance involves numbers, I am sure the omnipotent ones can provide the solution to this question:

The least common multiple of positive integers a, b, c and d is equal to a + b + c + d. Prove that abcd is divisible by at least one of 3 and 5.​

 

[Steve Borden]

Actually Manorleas I think you will find that they did need the data. As I understand it if a fund is suspended then there is no value for the units and therefore there is no way to calculate a loan to value ratio. If there is no value how can you compare a loan to it to get a ratio?

Maccka

It would have been quite simple to fix a historical point of reference when say the All Ords was 5130 on 4/9/08 and the fund was worth $1m, then on 17/10/08 when the All Ords was 3988 work on the basis the fund had reduced in value by 23% add say another 5% as a margin for error and assume the fund was worth $0.72m. Now if the margin loan was for $0.70m it would have been safe to say the client was in margin call. Alternatively if the margin loan was for $0.50m then the LVR was 69%.

Sure it's a lot of work but that's what they were getting paid for, it aint rocket science, but rather than do the work and earn our money let's pin it all on the Bank.

They apparently had these fantastic systems why didn't they run a shadow ledger to protect their client's interests?

 

[Garpal Gumnut]

gg, for some reason I can't come up with a caption so I'll just provide the link...

http://www.newspix.com.au/Packages/ViewImage.aspx?id=732124

(with apologies to Rupert)

Or this with apologies to cartoonstocks


gg

 

[Harleyquin]

It makes sense mate.

Financial advisers are dills, better suited to working on the roads as stop go people but they'd probably stuff that up as well.

gg

GG why do all the financial experts tell us to go to a licensed financial planner and take their advice? Whether you go to ASIC, David Koch and there's a few others I have seen but can't recall their names but this is their advice. For the financially astute they don't need anyone they can look after themselves. Nobody should ever assume that we all know what to do with our finances and how we can make the most of them. We were very good at putting our money in the bank and were constantly told by others that we should be doing something more constructive with our money but had no idea what to do or who to go to, so our first port of call was a licensed financial planner and we took their advice. We had no idea if iwhat they were suggesting was the right thing to do or not but didn't know what else to do.

We still don't know what to do so from now on we will just put it in the bank. I think that those of you out there who are clever with your money are very very lucky. We have things that we are clever with but knowing how to manage our money and make the most of it isn't one of them. Someone from this forum has sent me a link and said 'you can do it' and I intend to read it this weekend. Maybe I'll learn what to do after all.

Financial planners will need to come with a warning label on them from now as there are thousands of us who have been seriously burned and we all have twenty or more close relatives who are looking at us thinking 'look what a financial planner did to them there is no way I'll go near one' and suddenly you have millions who will never ever trust a financial planner again, and we are one of them and have many many family members who are thinking 'no way we don't want to know about these mongrels if you can't trust them.'

The sad part is there are some wonderful financial planners out there and they are being ostracised by this occuring to so many. The hard part is finding out who to trust and who not to trust and I don't know how to do that. It interests me that so many clever financial people on this forum say they will never trust a financial planner either. Wonder why???

 

[Garpal Gumnut]

GG why do all the financial experts tell us to go to a licensed financial planner and take their advice? Whether you go to ASIC, David Koch and there's a few others I have seen but can't recall their names but this is their advice. For the financially astute they don't need anyone they can look after themselves. Nobody should ever assume that we all know what to do with our finances and how we can make the most of them. We were very good at putting our money in the bank and were constantly told by others that we should be doing something more constructive with our money but had no idea what to do or who to go to, so our first port of call was a licensed financial planner and we took their advice. We had no idea if iwhat they were suggesting was the right thing to do or not but didn't know what else to do.

We still don't know what to do so from now on we will just put it in the bank. I think that those of you out there who are clever with your money are very very lucky. We have things that we are clever with but knowing how to manage our money and make the most of it isn't one of them. Someone from this forum has sent me a link and said 'you can do it' and I intend to read it this weekend. Maybe I'll learn what to do after all.

Financial planners will need to come with a warning label on them from now as there are thousands of us who have been seriously burned and we all have twenty or more close relatives who are looking at us thinking 'look what a financial planner did to them there is no way I'll go near one' and suddenly you have millions who will never ever trust a financial planner again, and we are one of them and have many many family members who are thinking 'no way we don't want to know about these mongrels if you can't trust them.'

The sad part is there are some wonderful financial planners out there and they are being ostracised by this occuring to so many. The hard part is finding out who to trust and who not to trust and I don't know how to do that. It interests me that so many clever financial people on this forum say they will never trust a financial planner either. Wonder why???

Yes mate its a caveat emptor or buyer beware situation.

Many of the older financial planners are ex insurance salesmen who sold insurance nobody would ever need.

The younger ones just do courses that any old jack could do online or through TAFE.

Investing is risky.

We are all prone to greed and fear.

Just recognising that is half the battle. some poor storm bastards say they weren't greedy. If they weren't that is a surprise. What they lacked was fear, because Manny , and the other Storm advisers who are now connected with SICAG took care of that with their spiel.

So trust nobody.

Recognise greed and fear.

Make up your own mind about investments.

Have a stop loss, that is a point where if you are wrong you get out and go into cash or another investment.

Anyone can be a financial planner.

Oh and if you go to one and they have a good looking sort at the front desk, fish in a tank and a crapper better than yours. RUN.

gg

 

[Harleyquin]

Yes mate its a caveat emptor or buyer beware situation.

Many of the older financial planners are ex insurance salesmen who sold insurance nobody would ever need.

The younger ones just do courses that any old jack could do online or through TAFE.

Investing is risky.

We are all prone to greed and fear.

Just recognising that is half the battle. some poor storm bastards say they weren't greedy. If they weren't that is a surprise. What they lacked was fear, because Manny , and the other Storm advisers who are now connected with SICAG took care of that with their spiel.

So trust nobody.

Recognise greed and fear.

Make up your own mind about investments.

Have a stop loss, that is a point where if you are wrong you get out and go into cash or another investment.

Anyone can be a financial planner.

Oh and if you go to one and they have a good looking sort at the front desk, fish in a tank and a crapper better than yours. RUN.

gg

Thanks for the advice GG so I need to find one with some old decrepid at the desk, no fish and an old outhouse out the back. Sounds like good financial advice. ...and educate yourself so you don't need a financial planner, and look after your own money. I'm taking this all on board, by this time next year I should be half way there I reckon.