I laughed along with the rest of America when Tina Fey (or was it Sarah Palin?) said "I can see Russia from my house." but the quote that sticks in my head and resurfaces about every other day was back in September when Warren Buffet said
“You see, the economy is like a bathtub - you can’t have cold water in the front, and hot water at the back!”
I was reading Mark Perry's blog this morning and he referenced a couple quotes from Thomas Sowell, author of "Basic Economics: A Citizen's Guide to the Economy" :
"The first lesson of economics is that we live in a universe of scarcity, and we face tradeoffs. The first lesson of politics is to ignore the first lesson of economics."
and
"You want the impossible? You got it. Politicians don't get elected by saying "No" to voters. People can get the possible on their own. Politicians have to be able to offer the voters something that they cannot get on their own. The impossible fills that bill perfectly."
and
"You want the impossible? You got it. Politicians don't get elected by saying "No" to voters. People can get the possible on their own. Politicians have to be able to offer the voters something that they cannot get on their own. The impossible fills that bill perfectly."
Scale these quotes down to your personal economic security plan and you get "There is no free lunch.", "If something sounds too good to be true, it probably is.", and "You can't have your cake and eat it too." You get the picture.
I believe that too many people who call themselves financial planners have become nothing more that "yes" men to their clients. They lack the courage to politely inform their clients that their expectations may be a little unrealistic. This opens the door for guys like Bernie Madoff to run giant Ponzi schemes and market them freely through reputable brokers and investment firms.
Consequently, 81% of high net worth investors are now considering taking money away from their current advisors and 86% of them plan to tell others to avoid their advisor altogether while only 2% of them would recommend him or her to someone they care about. The advisor really didn't do anything wrong other than try to meet rather than mange their clients' expectations.
If you happen to be among those who are considering changing advisors, make sure you don't end up with another "yes" man or you'll be shopping around again when the next bear market comes around.
Remember: A portfolio without a plan is really just a bunch of accounts.
