The Big Picture For The Week of June 19, 2005

Yesterday my wife and I had to drive to Phoenix to visit with some of my family that was visiting other relatives that live down there.

As we call caught up with each other the conversation came around to what I have been doing lately. They all know about the blog and have seen the site but most don't read it because they are not that into market related reading (who can blame them?).

Someone asked me about why I spend the time because it is not much of a money maker. The question misses the point entirely and teaches me that very few people really get what this is about. Hopefully if you read this site regularly you get it.

I feel very strongly that the investment part of the financial services world is badly broken. Too many people have blind faith in the wrong thing. Just because this might be true (I say might because this is opinion after all) does not mean that people will ever have to face any consequences for this. Think of it this way; if you had put 100% of your portfolio into JDSU back on January 2, 1996 at a split adjusted $1.15 and sold it all on March 6, 2000 (the highest daily close I could find) at $146.53 (split adjusted) you probably would not fully realize the risk you had taken but you took it nonetheless.

I think the conflict that exists at the brokerage office or at the bank is analogous. Doing the absolute best possible think for the client is not the top priority of these firms. That may or may not be the priority for a given sales person, who knows? Most sales people are just trying not to hurt the client. Case in point is the Morgan Stanley S+P 500 Index Fund (SPICX). Clearly this fund will not hurt anyone but it has expenses of 1.46% and yields 0.62%. C shares usually pay the broker every year, hence the high fee, and that fee structure also accounts for the low yield. More expensive and lower yield, not very compelling yet it has about $160 million of people's money. Most big firms have these funds. Not the best possible thing but not Enron either.

The point of this blog is to help people see this and to one way or another learn a little more than they previously knew. People may take what they learn here and other blogs and manage their own assets or become smarter consumers of brokerage services.

The writing helps me in several ways. Writing out some of my ideas helps me work through my thought process, I have had a chance to talk to some people in the business I would have never otherwise met, I have some very smart readers that give me all sorts of good info and share insight with the comments feature of this site, I really like the writing but the biggest thing for me is that I feel like I am helping a lot of people. This is wildly fulfilling.

And that really is the big picture.