Will Rogers was fond of saying, “Buy low, sell high … and if it doesn’t go up, don’t buy it!”
That’s a whimsical sentiment, but I wonder what’s in the air when I read about the alleged fraud by Goldman Sachs described in the civil complaint filed by the SEC, referenced in the recent article here. I wouldn’t jump to conclusions too quickly. In too many ways, this episode is reminiscent of earlier 1980s battles with Michael Milken. Notwithstanding Milken’s misdeeds, my vivid memory is that there were accredited investors and savvy buyers on both sides of those transactions perfectly capable of making independent decisions. Some of them were wrong and they lost money, but in virtually every case, they were well-equipped to make sound decisions … if they did their homework.
These challenges typically arise when people lose money … and there’s no question a lot has been lost. But, to assume that people who lose on one side of a transaction, are incapable of making prudent independent decisions and were sold a bill of goods , is the flawed argument that often pervade these matters. There’s a lot we don’t know but it’s certainly conceivable that this is yet another example of someone seeking redress for a poor investment where they either didn’t do their due diligence … or they were just plain wrong. We’ll watch this closely, but always remember that there’s two sides to every transaction and while you might think a stock is going up, it may fall … and likewise, just when you think a stock or an alternative investment vehicle is garbage and bet against it, you may also be wrong.
The lesson in this is simple. Do your due diligence. Read this carefully … listen to trusted advisors and insist on understanding the transaction. Don’t hesitate to call in another advisor for a 2nd or 3rd opinion. There is no escape or excuse from doing your due diligence, the absence of which I suspect is at the root of most of these challenges. Think for yourself. Make your own independent judgment and be willing to recognize that you may be just plain wrong … and be prepared to accept that.
If you can’t accept that, don’t make the investment in the first place.