Hello all. Sorry about the lack of posts recently, Beth & I have been really busy at work. Both of us work in the financial services industry and have been so busy as financial markets continue to experience severe turbulence.
A recent article in the Financial Times caught my eye. The article was about Charles Prince who was the former CEO of Citigroup, the world's largest financial services company with assets of more than USD 2.3 trillion and 332,000 staff around the world!!
Prince was quoted in July shortly before the collapse of the subprime market as saying;
"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing". Unfortunately for Prince and world financial markets, the DJ had played too many tunes and the club was well and truly closed."
However, this got me thinking about a nightclub as an analogy of our attitude to personal investment. Historically, nightclubs are very fickle businesses opening and closing with regularity, often under new management. The most important factors for success are not only providing what the clubber wants, but also maintaining that element of chic or cutting edge cool. Initially the "in" crowd will come to a new club, glamorising it. As word goes around, the club develops a reputation as THE place to be. It becomes more and more popular, with everyone wanting to get in. So much so that if "your name's not down you're not coming in". Management become increasingly aware of their 'cash cow' and prices go up, marketing increases, top DJs are brought in and it's champagne and VIP rooms all around.
This is the point where the original hip crowd realise that what made the club cool in the first place has all but disappeared. They look at the dance floor with ladies dancing around their handbags and guys checking them out in their Ralph Lauren suits and head for the door. Initially nobody notices. The DJ plays on. The barman passes the waitress another magnum of Cristal Champagne. Over the weekends however, the paparazzi stop showing up, the queues begin to thin and a dated feel begins to enter the club every Saturday night. After a few months, all but the last stragglers have moved on leaving them to pick up the tab.
Personal investment schemes can follow a similar pattern. From Spanish property, to buying to let, to investing in subprime mortgage products. We as private investors are usually the last to hear about the best new deal and are often the ones left footing the bill. This is not to discourage anyone from investing, but always be aware that even the top professionals in the world get it wrong .......... regularly. They are lucky enough not to be investing their own money, you are not.
And what of our friend Mr Prince? Well, investors called for his head following the subprime collapse and he was forced to resign. Beware, its murder on the dance floor.
A recent article in the Financial Times caught my eye. The article was about Charles Prince who was the former CEO of Citigroup, the world's largest financial services company with assets of more than USD 2.3 trillion and 332,000 staff around the world!!
Prince was quoted in July shortly before the collapse of the subprime market as saying;
"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing". Unfortunately for Prince and world financial markets, the DJ had played too many tunes and the club was well and truly closed."
However, this got me thinking about a nightclub as an analogy of our attitude to personal investment. Historically, nightclubs are very fickle businesses opening and closing with regularity, often under new management. The most important factors for success are not only providing what the clubber wants, but also maintaining that element of chic or cutting edge cool. Initially the "in" crowd will come to a new club, glamorising it. As word goes around, the club develops a reputation as THE place to be. It becomes more and more popular, with everyone wanting to get in. So much so that if "your name's not down you're not coming in". Management become increasingly aware of their 'cash cow' and prices go up, marketing increases, top DJs are brought in and it's champagne and VIP rooms all around.
This is the point where the original hip crowd realise that what made the club cool in the first place has all but disappeared. They look at the dance floor with ladies dancing around their handbags and guys checking them out in their Ralph Lauren suits and head for the door. Initially nobody notices. The DJ plays on. The barman passes the waitress another magnum of Cristal Champagne. Over the weekends however, the paparazzi stop showing up, the queues begin to thin and a dated feel begins to enter the club every Saturday night. After a few months, all but the last stragglers have moved on leaving them to pick up the tab.
Personal investment schemes can follow a similar pattern. From Spanish property, to buying to let, to investing in subprime mortgage products. We as private investors are usually the last to hear about the best new deal and are often the ones left footing the bill. This is not to discourage anyone from investing, but always be aware that even the top professionals in the world get it wrong .......... regularly. They are lucky enough not to be investing their own money, you are not.
And what of our friend Mr Prince? Well, investors called for his head following the subprime collapse and he was forced to resign. Beware, its murder on the dance floor.
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