George Pinto wrote: > So many of you make investment decisions with your precious life savings > based on bogus numbers put out by various countries and institutions? The > latest investors to be burned were Facebook investors. Do people really > believe the numbers put out by the US Fed Reserve, the Chinese government, > Wall Street, the USA government, European governments, the Indian government, > global banks, etc.? You really trust the garbage coming out of the > international > financial system and its many institutions in this day and age? > > I can only hope you did not trust Enron's numbers in 1999 and Lehman Brothers > and AIG numbers in 2007 or the mining companies' numbers published in Africa. > Anyone with an EXCEL spreadsheet can creatively "photoshop their numbers" > (yes, you just read this phrase here first).
George, It is a dangerous investment world out there. Not everyone has the time or insight to properly research the companies they want to invest in. At times, even professional investors miss the red flags when researching opportunities. Then you have the additional danger of companies that are birthed as frauds or which get hijacked to become fraudulent. Shares of such companies are hyped or marketed by the smoothest of salesmen and it is easy for the best of investors to get fooled. Even when financial regulations are in place, some crooked businessmen find ways to circumnavigate them. The way to lower your investment risk, is by buying mutual funds. This is also how pension funds invest your premiums. They spread the risk by buying a lot of companies knowing that some of the companies will fail, some will give extraordinary results and most will give steady returns over the years. The key here is to be invested over the long term. The value of mutual funds can fluctuate over the short term but is usually the best place to invested in, longer term. I have benefited a lot from my steady contributions to mutual funds. As far as numbers being released by governments is concerned, everybody has a different level of faith in them. For example, the US govt calculates US inflation without taking into consideration the cost of petrol or food. These two expenses can be the biggest monthly expenditures for a lot of people, yet the US govt has a reason why it does not take the two prices into consideration. Personally, I make use of any number released by any govt. Where I get scared though, is when govts are unable to release financial numbers. Take a look at Greece or Spain. The situation there is that even those who should be in the know, are not sure on how bad the situation is. Last week, as Gabe will tell you, German government bonds were trading with a negative return. This means that you lend money to the German govt, get no interest AND pay a fee for that privilege. The people who get hurt the most here are the senior citizens who require an income from their savings. The current monetary policies of western govts have put seniors and those who need fixed incomes, into financial jeopardy. Lastly, a currency has value only when it is in limited supply. An increase in the supply of a currency means that the govt is willing to debauch the value of its currency. QE I and QE II were just the opening salvo's in the US. The US govt is now addicted to printing money. Those holding the currency of govts that are on a printing spree are taking a huge risk. For those interested on how big a risk, Bob Mugabe's Zimbabwe is the study case. Mervyn Lobo PS. Gold has been increasing in value by 16% every year for the past ten years. In case you are wondering why few 'financial advisers' recommend buying gold, it is has to do with the commissions.......
