Rush on Funds in Florida

By Gary · Saturday, December 1st, 2007

In Florida and other places, people are watching investments in subprime mortgages perform their own “honey I shrunk the kids” act”.  On today’s news that the State of Florida basically shutdown withdrawals from an investment pool for local governments, And while these funds are considered “the safest” around because they are in may cases overnight plain vanilla simple money market cash funds with limited or no leverage, they have exposure through some of their investments in seemingly unrelated ways.   And while the extensive fund descriptions and other legal documents will say buyer beware, read the find print and past performance is no indicator of future performance, our John Does read ads or see 30 second spots about safety and principal preservation, and after they invest significant amounts – the seemingly unthinkable hits. 

 

Bloggers, Twitterati, podcasters and the like were often dismissed as having insular discussions and not having an impact beyond that space.  I beg to differ.   The investment fraternity does have an insular community with PHDs, engineers, Mensa members and the like.  And they keep coming up with new ways to create income and fees.  But buyer beware – if rates are low and a conservative money market fund is beating a low benchmark NET of investment fees, you don’t need to be a rocket scientist to wonder or ask HOW?

 

And what is the risk for marketing and advertising? When people read safe, principle protected, secure investment by leading successful firm, with a small disclaimer at the bottom about some fine print, you can be sure that from a legal sense the agency and its related partners are protected from consequential damage claims in lawsuits.  But in the court of Word of Mouth – they may never recover

 

Without saying that anyone did anything wrong – it is incongruous to me that a person placed in a position of trust with the skills and qualifications to manage billions, can be surprised or find out post fact that instruments or leverage existed.  Firstly – did they read the documents?  Secondly, a prudent manager today should be looking at risk, reporting and compliance on an ongoing basis.   Marketing (collateral materials, ads, brochures, etc) are designed to raise assets for funds.  The quant’s, PHD’s, MBA’s and engineers are engineering returns and performance.  And they don’t all say things the same way.  It is no surprise then that you end up with the sub-prime mortgage fiasco or its version-du-jour every few years.

 

When this kind of breach of trust happens and 90% of the population has a 30 second huh? sphincter reaction, not knowing how it will impact their savings, retirement and cost of living, one wonders if the following acronyms have some merit:

Now someone has to start digging into and out of this mess.  Stay clean!

Topics: Finance, Life, Marketing · Tags:
 

Leave a Comment

« | Home | »