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Can the big investment firms ever be trusted again?

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Many people invest through the advice of the big firms, but how can they be trusted ever again, after the tech wreck it was revieled they were offloading shares to there own clients with misleading research and reccomendations now it seems a decade latter they were at it again :mad:


"Goldman Sachs bet on the demise of the US housing market as the economy teetered on the brink and as the firm sold mortgage-based investments to clients, company emails released on Saturday showed".

Here,s the Link.

http://www.thebull.com.au/articles_detail.php?id=10972
 
According to a select few on here you can't trust Investment firms, Governments, The Fed, RBA, Brokers, Independant Reporting Agencies, Paper Money etc etc.

According to the same few the only thing you can trust is that ONE day (That day is not known) Silver will escape from the manipulation and explode in price.

:rolleyes:
 
Re: Can the big investment firms ever be trusted again

Short answer, NO!

But then, one should never 'totally' trust anyone whom you take advice from and invest with, more so if they are one and the same (vested interest).

I've always considered it a matter of caveat emptor, apart from fiduciary duty.

But even then if you knew or suspected they didn't, or were unlikely to abide by their fiduciary duty, caveat emptor should kick in to at least take further measures to mitigate the risk or possible loss or avoid dealing with them altogether.

Another rule that often makes good sense is not to deal exclusively with one firm.
 
I work for a Smaller Investment firm and the returns on clients portfolios are quite impressive ranging largely but not uncommon to have 100% growth over 5 or 6 years on capital plus dividends, obviously people who are willing to take larger amounts of risk and operate on there own can make far greater profits.

I think that investment firms work for people with larger amounts of money who are after long term growth and don't have the time or the know how to operate on their own.:2twocents

I am interested to know if any employees from pre GFC will come against Goldmans and say this has been happening for years, surely this isn't a one off.
 
in the title, why the word "again"

the older you get, the more you realize that greed pervades everything and when money is involved you can hardly trust anybody, let alone big investment firms.:eek:
corruption is everywhere.
 
C'mon guys you go to a stockbroker with a heap of cash and ask if it's a good time to invest...of course they will say yes.

When you visit a real estate agent with the same question....of courset hey will say say yes as well.

Both of the above groups work on a commission basis. Their incomes are determines by how much product they can sell, so even though many many brokers knew that the market was ripe for a large correction, if they had advised their clients to exit the market, they would have been fired a month or two later when they were unable to bring any brokerage to the firm.

The only way to stop that...is to use some other kind of incentive rather than commission.

Cheers

Sir O
 
That's is why I can never be a financial advisor because I will go broke. My advice to anyone is - ONLY TRUST YOURSELF.

The best investment is your house, for the following reasons,

1.) You are your own boss.
2.) While your "investment" is slowly appreciating over the years you get to make use of it, you stay in it.
3.) Your primary place of residence is completely tax free.
4.) In the long term it is not very volatile i.e. prices don't move up or down at alarming rates. A 10% movement in a year is BIG deal.
5.) It is very secure - difficult for a third party to go broke and you lose your investment.
6.) Involves a significant amount of money, therefore any gains are big.
 
There are two types of the so called investment house. There is the INVESTMENT house and there is the investment house that trades in investments.

There is a big difference. The INVESTMENT house is just that alone. It makes investments that does two main things. It is a source of funds for commerce and industry and it is a go between those that have funds to invest and the businesses that need them.

The trading house does very little productive in nature. It is motivated by greed and will do almost everything possible to manipulate the share market for short term gain.

Yes, there are big investment firms that can be trusted to TRY and do their best towards getting a good return with reasonable risk.

I believe they are in the minority.

The greed,the doubtful honesty and the get rich quick attitude of most "young guns" in the majority of financial institutions these days is threatining the long term viability of the capitalist system. Unless these things change we are about to enter turbulent times.

These facts are evident even in the attitude of contributors to these forums.:banghead:
 
vincent191 said:
That's is why I can never be a financial advisor because I will go broke. My advice to anyone is - ONLY TRUST YOURSELF.
Click to expand...

I AM a financial adviser, funnily enough that is my advice as well. You are the best person to look after your investments, but in order to do that you need to become educated, because what you do not know is what will hurt you.

for example....

The best investment is your house, for the following reasons,

1.) You are your own boss.
Click to expand...
Unless of course you owe money on your house in which case you work for the bank.
2.) While your "investment" is slowly appreciating over the years you get to make use of it, you stay in it.
Click to expand...
True
3.) Your primary place of residence is completely tax free.
Click to expand...
true enough
4.) In the long term it is not very volatile i.e. prices don't move up or down at alarming rates. A 10% movement in a year is BIG deal.
Click to expand...
Know why that is? Know what features of your house can cause volatility in price?
5.) It is very secure - difficult for a third party to go broke and you lose your investment.
Click to expand...
True enough
6.) Involves a significant amount of money, therefore any gains are big.
Click to expand...
Usually also involves a significant amount of leverage - which also makes the gains look big.

What you may not know...

An investment property (if structured properly) has most of the advantages you mention above with the added advantage of tax deductible interest payments and the disadvantage of CGT.

Which is therefore more damaging to your long-term level of return? CGT or no tax deduction? CGT of course is not calculated until you actually sell the investment, so the critical factor is how long do you intend to hold the asset? If you're only going to hold it for a couple of years....avoiding CGT is more likely to be accretive to you. Eight years or more however and you are very definately MUCH better off to take your tax break.

This is just a simple example of why education on these issues is highly important.

Cheers

Sir O
 
As an outsider my financial advice for the uneducated would be:

Step 1) Pay housing loan and all debt off. You are highly unlikely to make whatever interest rate you are paying on the debt, risk free and after tax, by investing instead of paying off debt.

Step 2) Once debt free, only invest in a low cost index fund or a Big 4 bank term deposit. Perhaps get advice about how to structure finances (eg super, will, family trust, etc) from an accountant and pay on a per hour basis.

Sure the above might not be "optimal" but given the agency costs faced by uneducated investors it is probably the best they can do.
 
In answer to your question, no. No, no, no, never ever, ever again, not ever again, no.
 
Does all this strike anyone else as a bit naïve? There are people on the long and short side of everything, and in fact, that is the nature of being a market maker. A fact of the market is things go up and down and the only rule to live buy is caveat emptor. Experienced, sophisticated investors thought the product was worth the price it was offered at and they turned out to be wrong. Big deal. It shouldn’t shock anybody that Goldman exist to make money. Nothing to see here, move along.
 
yonnie said:
didn`t know we were talking about the housing market here????:eek:
Click to expand...

We are not talking about housing market. Someone ask if big investment firms ever be trusted again. Some of us are saying the only person you can trust is YOURSELF and giving a prime example of an investment strategy which you can control YOURSELF and the advantages.
 
vincent191 said:
We are not talking about housing market. Someone ask if big investment firms ever be trusted again. Some of us are saying the only person you can trust is YOURSELF and giving a prime example of an investment strategy which you can control YOURSELF and the advantages.
Click to expand...
This is exactly the point. Joe Bloggs doesn't go to Goldman for investment advice or products. Professional, experienced, sophisticated investors do. The vast majority of people here already have most of their wealth in their own home.
 
doctorj said:
Does all this strike anyone else as a bit naïve? There are people on the long and short side of everything, and in fact, that is the nature of being a market maker. A fact of the market is things go up and down and the only rule to live buy is caveat emptor. Experienced, sophisticated investors thought the product was worth the price it was offered at and they turned out to be wrong. Big deal. It shouldn’t shock anybody that Goldman exist to make money. Nothing to see here, move along.
Click to expand...

I took the opening sentence "Many people invest through the advice of the big firms", to apply loosely to Banks mainly but also financial, insurance etc advisers and anyone promoting a financial product generally. I took the reference to GS just as an example of one link of the chain.

As an example my brother suggested our mother take some profits just after the GFC started. She wanted me to accompany her to her bank where she had an appointment with their Financial Adviser who recommended holding onto all her bank and other blue chip shares cos they didn't see any reason for them to loose value.

They all lost value as we know, but some of her other stocks have also stopped paying dividends which really hurt her cash flow.

If the head economists, CEO or CFO knew the risks of the products they were holding, they certainly didn't pass it on to the front line so called 'Financial Advisers' in the branches.

Not sure if the paper trail is totally clear yet, but it seems our retail/trading banks were overly exposed to the sort of product GS promoted and what many considered excessive risk for trading banks to get too involved with... the arguement for having clear and tighter demarcation lines between investment and trading banks or divisions where they overlap.

It broke traditional protocols for trading banks, or their trading divisions at least, and shot the confidence of the average invester and customer, hence the need for the gov gaurantee and consideration to legislate to split off the trading divisions to operate under tighter rules.
 

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