Where do you invest?

With the economy turned bad, CEO's turned bad in many cases, regulators turned corrupt or morally blind in far too many cases, banks turned from financial servants to financial predators, and so on...........what is an investor supposed to do to protect their future. Where do you invest safely?

One expert answered this to me by saying "Invest in what you know and are familiar with larry. Whether that is land, business inventory, things where you have some expertise etc. This expert went on to explain how the best and brightest company in the land can be brought down today with "financial weapons of mass distruction" (quote by Warren Buffet) like credit default swaps, and a host of other derivative type instruments that wall street and bay street alchemists use to try and generate new and larger fees for themselves. Whatever stock you invest in can nowadays be subject to failure due to the creative use of these instruments.

The other risk that we have begun to see far too much of is the internal raping of the company by the very management hired to run the place for shareholders. Think Nortel, think Conrad Black type of managers, as well as the many names in the US.
So while stocks are historically considered one of the safest long term investments (for buy and hold people like Warren Buffet, who stick with quality), there is a new move afoot that brings white collar crime and derivative speculation right into that security type.

Which brings me to one of the most important suggestions I can give: Invest in regions where securities laws are enforced and where independent police investigations are allowed to proceed into financial crime. The largest pension fund in Canada used to be run by Claude Lemorouix, and his quote in the National Post a few years back suggested that he would not buy any Canadian company unless it was listed on a US exchange, since buying it there placed US authorities in a position to prosecute crimes by CEO's etc.

In Canada, all financial markets and securities are "self regulating" which means we are trusting our clever, cunning financiers to police themselves. While they have set up more than one hundred "protective" organizations and agencies, there is so far not one single, recognized agency in Canada that is not getting it's salary (and it's people) from the investment industry. What that means is that if you have a compliant against a large Canadian player like a bank for example, you are screwed, to use a technical term. If you have complaint against a small player, sometimes the self regulators will take that organization down to help their larger supporters (not to help you, the abused investor) but the end result is that the self regulators will keep your money if any is recovered. I shit you not, that is how they operate. Research it yourself. These people are not working for the benefit of the public interest.

So buyer beware with even the best stocks in Canada, from the top dealers in the land.

Speaking of dealers, do they owe you a duty to place your interests first and foremost? Their marketing material would suggest yes. Their behavior suggests otherwise. For example:

Over 80% of mutual funds sold by these "reputable dealers" have in the past been sold using the highest cost commission structure possible, despite lower cost choices available. It that trusted professional advice? No.
More recently (2009 I believe) 92% of all funds sold in Canada were sold into something called WRAP accounts, usually funds of other funds, or proprietary funds. (house brands) These cause fees upon fees, or fees kept in house in the case of the house brand, so profits can be up to 26 times greater if they sell you the house fund. Who cares if they perform better, worse, or even, if the company is getting up to 26 times more profit, it is about them and not about you. Otherwise why the 92% of sales capture rate.

Speaking of sales, did you know that your trusted advisor has less training to be licensed that your hairdresser or your plumber? Or that their license with the government was officially listing them as "salesperson" up until sept 29, 2009?

No you did not know this because despite securities Commission laws saying they must tell you this info, they never do and the laws never get enforced. Remember that bit about self regulating?
After Sept 29, 2009, your financial seller is now listed as a "dealing representative", but you can bet they will also never properly disclose this to you. Fraudulent misrepresentation is the simplest description I can apply to what your financial seller does to you in Canada.

So where are we at choosing what to invest in? The banks have turned predatory. The CEO's are corrupt at worst and self serving at best, despite being professionaly paid to behave otherwise. 80% plus of sellers are predatory sellers, trying to fool the public into the belief and the trust that they are professional and their to help. Wrong.
The markets are subject to some financial manipulations by some of the craziest financial products ever invented, ie, credit default swaps allow them to do the equivalent of buying insurance on the neighbors home, then burning the home down to collect the insurance.

Regualtors are on the take and paid 100% by those very same financial wizards.

Politicians (like Ted Morton, Alberta Finance Minister, and twelve others) feel they owe a greater duty of loyalty to their kingdoms., er their securities commissions, thus the politicians seem also to be owned by those with the money, and not serving those they are sworn to serve.

I hate to sound so pessimistic, but that is the way it works........or does not work, depending upon which side of the fence you are on.

I keep the solutions to myself, as well as the types of investments where your money cannot be taken from you by fast talking, self policing shysters in suits. Other than some ranting here and there on the web, and elsewhere, it is too difficult to tell people where to invest unless one is face to face, and fully informed as to what each persons individual situation is. It occurrs to me that this world should employ "financial bodyguards" and I hope to find myself fully employed in that capacity at some point. For now I am quite happy to work like this where I can, and the rest of the time give my experience away freely to governments, legislators, media, public speaking and helping abused investors.

I have a section on my film site titled "private financial investigator", which is something available to those who wish to hire someone with thirty years of hard earned experience, combined with not a single product to sell, nor a single bank or other institution to have to misrepresent to my clients.

Thanks for reading this far along.

CIBC exposed in defrauding elderly clients

From Maisonneuve Magazine, comes this fearless article to illustrate complete failure in Canada to regulate and protect investors. The story speaks to a captured culture of deceit that Canadians should be aware of to protect themselves against predatory financial behaviors.

"The Incredible True Story Of Mr. Markarian"

http://docs.google.com/fileview?id=0BzE_LMPDi9UONzY5NTk3YjktZDlmZi00MWM3LWFlNDMtNTY1NDczZjk4Yzhi&hl=en

Alberta Securities Commission helps out fraud?

Feb 25, 2008

Media Release and key question for Alberta Provincial Election Candidates

From: Larry Elford, founder of http://www.investoradvocates.ca/ Representing the interests of several hundred ethically proven investment industry professionals, and several hundred thousand investment consumers.

Fact #1 Financial industry dealers are allowed to self regulate (police themselves) in Alberta.

Fact #2 Financial industry participants are allowed direct access to the law and to the Alberta Securities Commission (the ASC). In contrast, consumers are directed to a non-government body.

Fact #3 If you were to approach the ASC with a complaint, you would be referred to “self-regulatory” agencies, which are private, funded, paid, and responsible only to the industry the consumer is complaining of. Consumers are not only denied access to the protection of Securities Law in Alberta, they are forced to report financial abuse directly to the association of dealers that they are complaining of.

Fact #4 If consumers wanted to rob a financial institution, they would not be allowed to alter the law to make their robbery “legal”. When financial institutions wish to rob consumers, they are allowed to go to the Alberta Securities Commission and apply for “exemptive relief” from the law. This makes anything they do to you, under this exemption “legal”.

Fact #5 There have been several thousand such exemptions to the law in Alberta over the years. All done with no public input, no involvement of a judge, no public notice, and no consumer representation in the actual decision making process. The Alberta Securities Commission refuses to provide reasons to show how those exemptions are in the public interest in any way. As a consumer you will get more notice of your neighbor’s plan to build a garage too close to your fence, than you will get if your financial advisory firm chooses to dump bad products on you using a legal exemption.

Fact #6 The Alberta Securities Commission is partially funded by financial dealers, and part time commissioners earn $180,000 per year. Top-level salaries at our ASC are above $500,000. Does this explain why our securities law gets “adjusted” for dealers?

Fact #7 Police are rarely invited to prosecute these kinds of financial crimes or frauds. Other criminal code violations get treated and handled by police agencies, while Securities Act violations are handled by an industry policy of letting the “financial industry look after the financial industry”. Fraud, forgery, breach of trust, etc., are among the types of illegal acts which fall under the “we look after ourselves” category. These acts will continue to occur unless we do something about it.

I ask candidates to call for a public inquiry under the Provincial Inquiries Act. An inquiry into failure to protect Albertans and failure to give the public access to the law. One case alone consists of an alleged $800 million dollar abuse of customers. Would you support such an initiative, and will you ask for public inquiry into these failures on behalf of all Albertan’s?


Larry Elford, (former CFP, CIM, FCSI, Associate Portfolio Manager, retired, 2004 after twenty years of trying without success to improve conditions in the industry)

lelford@shaw.ca