February 13, 2009

Night with the Golden Girls

I am on the Gulf Coast where I just had a night out with the golden girls—which clarified for me why a Hollywood producer deemed Floridian widows' lives fodder enough to launch a sitcom.

Anyway, halfway through her second lemon-drop martini, octogenarian Ava started to talk about two friends who suffered losses in the Madoff scheme.

Then she said, "Madoff is not the first."

Several years ago, friends encouraged Ava to invest her funds with their charismatic (and, totally coincidentally, extremely good-looking) advisor. She was impressed with the consistent and above-market returns they got, but was also skeptical. If it's too good to be true, it probably is. But these friends had a lot more money than she did, and she figured they knew what they were doing.

So she invested $100,000 in a two-year contract for a 17% annual rate of return with Mr. Slick. The interest checks arrived on schedule, every month.

This got her invitations to lavish parties at his home, which housed a fish tank under the Lucite floor in the entryway. All this—his car collection and fantastically bejeweled wife—did not sit right with Ava.

The day her investment matured, she drove to the Mr. Slick's office and said she would not renew. "I want my $100,000 back."

"Oh, you have got to reinvest...you won't get these returns elsewhere," he said. Then, "You don't think I just have that money sitting right here, do you?"

She pushed back, her instincts fortified. "Of course I think you have the money right here," she said, pulling out her contract that stated the maturity date. "I want my money now."

Mr. Slick said he would deliver it the next morning. Because Ava wasn't going to be home, she asked him to leave the $100,000 check with her doorman—who, by this time, she trusted far more than Mr. Slick.

Ava got the check and deposited it. In an unrelated turn of events, she suffered a heart attack the following day. While watching television from her hospital bed, up popped Mr. Slick's face in that little upper right box of notoriety usually filled by a Britney or a felled politician.

Her former investment advisor had been indicted for running a Ponzi scheme. The feeds from Ava's medical monitors probably spiked off the charts—she felt as if she'd been socked in the stomach. Her first thought, There is no way that check will clear.

But it did.

Lessons learned:

  1. Do not assume that people who have more money than you, and are getting bigger investment returns are smarter than you.
  2. If it seems too good to be true, well… you know.
  3. Your instincts are there for a reason; pay attention to them.

Disclosure: I was really crazy about this guy I once dated. I thought I might, one day, want to marry him. Even though I was very young with underdeveloped instincts, something was working right for me, because I never quite made it to truly wanting to marry him.

Even today I remember a couple of innocuous things he said. Totally not a big deal. But on the other hand, maybe a really big deal. As of this writing, my own Mr. Slick is doing time in Federal prison for his Ponzi operation. Really.

No comments:

Post a Comment