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George Putnam, one of the country's leading turnaround and distressed investing professionals, shares his timely insight on the economy and turnaround investing opportunities.

Money Manager Stocks / Mutual Funds

Where Are the Customers' Yachts?

March 19, 2012

This headline could easily apply to Goldman Sachs today, as recently described by former employee Greg Smith. Actually, it is the title of a book written in 1940 by a former Wall Street employee named Fred Schwed, Jr. The title refers to a story about person admiring the yachts owned by bankers and brokers who asks where the customers' yachts were. Of course, the customers, who had dutifully followed the advice of the bankers and brokers, couldn’t afford yachts.

This just goes to show that there is nothing new about the attitude that Goldman Sachs employees were purported (probably accurately) to have about their clients. It was just as true in 1940--and likely has been forever--as it is now.

The point is that stockbrokers, investment bankers, financial planners and the like are in business to make money. And that money can only come from one place: the customers. There is nothing wrong with this.  In fact, it is the one of the basic tenets of capitalism. But it is crucial for investors to remember this and to ask “Why is this person trying to persuade me to make this investment?”

In many--hopefully most--cases, it is because the person promoting the investment really believes it is a good investment for you. But in most cases it is also because the person makes money by selling you the investment. It is up to you to understand the investment so that you can judge whether it is truly right for you.

We don’t mean to disparage all brokers, planners or bankers. There are many terrific ones out there who can help you make lots of money. Just keep in mind the old Latin motto “Caveat Emptor” (“buyer beware”). It’s okay for your broker to make money. Just make sure that you do, too.

(Anyone who thinks we are being too cynical should read Michael Lewis’ very amusing first book, Liars Poker, about his initial job as a junior investment banker. You’ll never listen to an investment pitch quite the same way again.)

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George Putnam continues his series on investing in distressed securities--this time focusing on how to find publicly traded distressed securities that might be promising investment candidates. Read More.

Market-Beating Profit: The 200+ Club

Turnaround stocks present a unique opportunity for savvy investors to buy in at bargain prices. Take a look at this list of just a few of our purchase recommendations that have realized a return rate of 200% or better:

200+ Club: Value Investing Stock Profits with 200% or Better Return

* Bristow remains in our active portfolio (currently as a Hold), and 2,849% gain is as of 1/17/17.

Five Struggling Stocks That Will Turn Around

 

stock market advicex

 

Kiplinger points out that despite the post-election stock market surge, not all stocks have benefited from the uptick: "More than 100 issues in the S&P 500 have fallen in price this year, including dozens that have slumped by more than 10%....Yet these stocks won’t all stay in the dumps forever. Some will mount a comeback in 2017, making it an opportune time to try to identify the best candidates."

 

Quoting George Putnam, Kiplinger details five value opportunities for the new year.

 

Learn more about Putnam's investing success with turnaround stocks.