November 27, 2003

What if?

by Chris Feeney

What if I invested in piggy banks? Right now I believe that might be the smartest move I could make considering the volatility of the stock market as well as the negative publicity being showered on the financial world. The sales of piggy banks likely will skyrocket as the latest financial scandal hits the news. Since this news has made me skeptical of investments in general maybe I could at least try to expand my future retirement funds with a sure thing like safes, mattresses or the like. Just as ENRON stories are finally dissipating the money world is being slammed again courtesy of Morgan Stanley and a mutual fund market scam.

Morgan Stanley recently was the second major broker to be fined and significantly punished ($50 million slap on the wrist) for allegedly pushing particular mutual funds on investors, not because they were the best for the customers, but because they were the best for Morgan Stanley based on sales commissions. Putnam Investments also agreed to a settlement on similar charges earlier this year. It seems like the brokers were pushing investors to buy a particular brand of mutual funds because they provided bigger financial rewards for the company. So, they were investing your money in order to make themselves more money, regardless of the fact that the customers were getting the short end of the deal as their mutual funds were more expensive and were making less money.

Itís starting to make those good old $50 U.S. Savings bonds look good. You just buy the bond and wait around for a few years until it matures - no broker fees or other ways of being manipulated or cheated. Or like I said in my opening, maybe our money is better off in our own piggy banks or stuffed in the mattress. While that may be a little dramatic, and obviously doesnít offer much opportunity to grow your savings for retirement or other future needs, it is at least understandable considering all of the recent problems with the financial industry. These folks didnít lose their money and actually still grew their investments, simply not at as good a rate as they could have. It just boils down to the fact that no one likes to be cheated.

If people do start hording their funds instead of investing or placing them in savings that will quickly dry up the well of low interest money currently available from lenders. That means no more zero percent purchases for new cars, refinancing of home mortgages or loans to expand your business. So while the money world scandals canít help but make us a little skeptical of the industry we most hope that it doesnít send everyone out into the backyard with a coffee can full of cash. Because, unless you have a medal detector and a shovel, it sure would make getting a loan real difficult.

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