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The Bloody Money Trail

A few Sunday’s back, the Press Democrat ran a front page story called “The Money Trail.” It was subtitled: “How one adviser’s promises of real estate wealth unraveled and investors’ life savings evaporated.” It was about a “financial advisor” here is Santa Rosa, named Gary Armitage and his associate Jeff Guidi. If you didn’t read the article, you should get a hold of it and read it—for your own self-preservation and not falling into such a scam as many Sonoma County residents did.

Armitage was promising people no risk investments in various real estate deals. He placed 100% of a client’s portfolio into private placement real estate partnerships—many of which he had some ‘related-party’ association with. These types of investments pay the salesman (Armitage) a big commission as soon as he gets the client to sign up and fork over the dough. You have to understand, this guy is a salesman, not an advisor.

Many clients of his sat by and watched their retirement nest egg vanish into thin air as the real estate and mortgage markets went in the tank. I suspect that if these clients ever catch up with Armitage, the Press Democrat may run another front page article called “The Bloody Trail.”

Some of his ex-clients are now my clients—so I know the damage which was done. Unfortunately, Armitage is not the only “financial advisor” in town that has a very warped idea of what prudent financial strategies are. Being in the business, I see what these advisors are doing and I just shake my head in disbelief. I suggest you get to know the character of the person you are entrusting with your money.

Another recent story in the news was about a fellow who lost $2 million in the stock market and jumped to his death off some cliff near Mt. Tamalpias. My feeling is this guy was taking this whole thing way too seriously. Markets go up and markets go down—we all know that. Mistakes happen—we know that too. But, sometimes, you just need to stop everything and count your blessings!

The stock market is in shambles—okay, stop, take a deep breath and count your blessings. Life goes on… and what you should be doing now is 1) assessing the damage, 2) considering options for getting your investments stabilized and 3) taking action to implement the best of these options.

This is a perfect time to review The Eight Great Mistakes Investors Make, which I’ve made available to you in the past. Here is a list of them (name only, if you want the full report call Milady and ask for it):1. OVERDIVERSIFICATION. 2. UNDERDIVERSIFICATION. 3. EUPHORIA. 4. PANIC. 5. SPECULATING WHEN YOU THINK YOU’RE STILL INVESTING, AND NOT REALIZING THAT YOU’VE CROSSED THE LINE. 6. INVESTING FOR YIELD INSTEAD OF FOR TOTAL RETURN. 7. LETTING YOUR COST BASIS DICTATE YOUR INVESTMENT DECISIONS. 8. LEVERAGE.

It’s difficult to avoid all investment pitfalls – even for the savviest of investors. That’s because many investors simply don’t have the time to process the vast amount of information available today and apply it to their complex investment needs.

With the money I manage, I began cutting back in my exposure to equities back in August of 2007. As the market has declined further, I’ve cut back further. The cash that I’ve freed up has been put into Conservative Allocation Funds, Money Market Funds and 3-Month Bank CDs. Now, I’m watching, waiting, counting my blessings, and looking for the right moment in the economic cycle to reallocate back to my usual, up-market investment holdings. I suggest you do the same.

My clients know they can call me or come visit me anytime they want to. If they leave me a phone message, I return their calls. We have open and frequent communication. Weekly e-mail update communications. Quarterly investment performance report meetings. My clients also know that I investment my own Mother’s investment portfolio in the same way and style as I do theirs. I take the business of managing my client’s money seriously and professionally. I never want to see my picture on the front page of the Press Democrat for having caused harm to anyone. More importantly, I don’t ever want to face a single client of mine that I have somehow been responsible for their financial ruin. I take this seriously, and earn my financial advisory fees each and every day—in good markets and bad. Hang-in there, I’ll talk to you again soon.