MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Archive for the ‘Quote of the Day’ Category

Barrons: MyPrivateBanking Takes Extremely Sensible Position

Wednesday, May 25th, 2011

We have been very honored that Barrons - probably the most prestigious investor magazine worldwide - has mentioned and approved of our research about discretionary accounts:

“SPEAKING OF MADOFF’S TREACHERY and the demand for transparency, new research findings by MyPrivateBanking Research show that only 10% of the world’s top wealth managers publish performance data for accounts that give the wealth manager or private bank the authority to buy and sell securities at their discretion.

Even more unbelievable is that just 22% offer specific information about their fees. And just 8% offer at least a three-year track record on the performance of their discretionary accounts.

MyPrivateBanking, an online independent advisor to wealth-management investors, says its results are based on an analysis of public Websites, including all reporting documents that the 40 largest wealth managers worldwide put online. MyPrivateBanking takes the extremely sensible position that discretionary accounts are like mutual funds and should open their books in a similar manner. And investors who can’t get this information (and keep in mind, some favored-few heavy hitters probably do) ought to get out, and get out now.”


“Hedge Funds Are to Bankers…

Monday, July 12th, 2010

…what the German football team is to the English: a nimbler, more skilful exemplar serving to highlight the latter’s plodding predictability.”

I am not sure if this quote is more flattering to the Germann football team or to the hedge fund managers. It is from a book review in the Guardian about More Money Than God. Whatever you may think about German and English football, the book is worth a read.


Will It Be Different This Time?

Tuesday, May 11th, 2010

Here comes my quote of the day by Ken Rogoff, well-known economist with some very accurate predictions about the financial crisis:

“Greece spent more than half the years since 1800 in default”

It seems to us that EU finance ministers possess an unhealthy dose of optimism to believe that this time it will be different (the costliest sentence in finance). But don’t worry and check our latest advice on the Greek disaster and what you should do with your portfolio. At least, it seems, the EU and the ECB have bought us all some time to readjust our assets.


Let the Bankers Fail

Tuesday, April 27th, 2010

“The trouble with Wall Street isn’t that too many bankers get rich in the booms. The trouble, rather, is that too few get poor — really, suitably poor — in the busts. To the titans of finance go the upside. To we, the people, nowadays, goes the downside. How much better it would be if the bankers took the losses just as they do the profits”

In an editorial for the Washington Post James Grant captures the essence of what financial reform should be all about. I think the same principle should apply to private wealth managers. Why not have fee arrangements that reward an adviser for profitable strategies and make him pay for bad advice?

“The job before Congress is to bring the fear of God back to Wall Street. Not to stifle enterprise but quite the opposite: to restore real capitalism. By all means, let the bankers savor the sweets of their success. But let them, and their stockholders, pay dearly for their failures. Fair’s fair.”


“For Nine Years I Was the S.E.C.’s Doormat”

Monday, March 1st, 2010

The New York Times Magazine has interviewed Harry Markopolos, an investment manager and math whizz who spent nine years to track the machinations of Bernie Maddoff’s hedge fund.  He concluded  early on that Madoff must be a fraud.  In November 2005 he sent a memo to SEC regulators titled  “The World’s Largest Hedge Fund  is a Fraud.” It described his suspicions about Madoff in more detail and asked the SEC to check his fraud theory.

In the NYT interview, Markopolos judgement of the SEC is a harsh one:

Q: “Why do you think the S.E.C. failed to wake up to Madoff’s $65 billion Ponzi scheme until he turned himself in?
A: “They weren’t even asleep at the switch; they were comatose. They didn’t respond to heat and light, much less evidence of wrongdoing. They were not engaged in the fight.”

The whole story is a great example how dysfunctional huge regulatory administrations have become in the financial industry. They are not even able to uncover a fraud scheme when someone else does the analysis for them.

Governments around the world are busy these days to develop grand schemes for new regulatory bodies and laws. No doubt, they will be even less functional. The dysfunctionality will most likely be proportional to the complexity of the law and the number of new bureaucrats hired.

Yet, ordinary investors should really take one learning from the Madoff story: Don’t trust the government to see the red flags and protect investors. It won’t happen. Or more precisely, it will happen but far too late. There is only one way for investors to protect themselves from fraudsters - do the critical analysis yourself,  and keep a very skeptical eye on the ocassional fund management Wunderkind.


Life and Death Struggle with Piranhas

Thursday, October 29th, 2009

“People do not seek employment in investment banks, brokerage houses, and mutual fund companies with the same motivations as those who choose to work in fire departments or elementary schools. Whether investors know it or not, they are engaged in an ongoing zero - sum, life - and - death struggle with pirhanas, and if rigorous precautions are not taken, the financial services industry will strip investors of their wealth faster than they can say ‘Bernie Madoff’.”

This is from the latest book of the famous William J. Bernstein. It is called “The Investor Manifesto” (and the first two chapters are available online for free). Bernstein is also the author of  the bestselling books (among others) The Four Pillars of Investing and The Intelligent Asset Allocator.