Bre-X, which I always thought sounded more like a soap product than a mineral conglomerate, is evidence that consumers are often more than ready to gamble away their hard-earned cash in hope of stockpiling even more.
Ah money, that precious commodity of which we just can’t seem to get enough.
Justice Peter Hryn of the Ontario Superior Court found Bre-X geologist and corporate head John Felderhof not guilty of hoodwinking consumers.
Felderhof’s lawyer heralded ‘good justice’ for both his client and all those gold futures speculators who inadvertently wallowed in the slime of stock fraud.
Hryn based his decision on the fact that the swindle was so cleverly done, even outstanding geologists and honourable scientists couldn’t see the light of day.
Hryn’s conclusion: if experts couldn’t, how could we expect a mere mortal like Felderhof to know the difference between naturally occurring gold and that which had been salted into the mix.
Felderhof is by no means home free just yet. But for now he does pass go, he does collect his $200 and he does not go directly to jail.
An investor class-action suit down the road may yet snare him and a handful of other complacent insiders. But for now Felderhof has been granted a rather tidy verdict.
The lessons to be learned in the Bre-X swindle are plenty. Here are three.
One, if you are planning to choose a career based solely on swindle, deceit and dishonesty, you had better be real good at it. Take your time, plan ahead, work through the details, see the pitfalls, be able to convince the experts, have a fallback position, invest your time wisely.
In other words, do your homework. I refer to this lesson as, “it takes a thief.”
Two, if you have spare change lying around, invest it in the stock market. Take the risk. What have you got to lose?
If you already have cash enough to get by, what the heck, loosen up will ya’? After all, you can’t take it with you. And even if you do get hoodwinked, you always have the class-action suit to wear home from the cleaners. I refer to this lesson as, “smoke ‘em if ya’ got ‘em.”
And here is the final and more serious lesson one should learn from all of this. I refer to it as “get real.”
Playing the stock market, for all that it is, is also all that it is not: smart.
Investing in the market means investing in people and products you know very little about. Because of this, investors gravitate to “reputable” brokerage firms who make it their business to know.
This strategy of course, as we have repeatedly learned, is oxymoronic at best.
As a matter of fact, in all our wisdom, we have invented and put into place tiny bits of law — like the Ontario Securities Act — which are nothing more than added insurance that brokerage firms really are oxymorons.
These laws have one major unintended consequence: they guarantee your brokerage house can’t learn the full story about the corporations and the products they willingly represent.
Your friendly (and I use the word with great latitude here) broker has got to remain “at arms’ length” from the very people — the corporate heads, accountants and managers — who more than likely know the real story.
By their very nature these laws are designed to keep us in the dark. In short, many of the security laws currently on the books are there to keep investment analysts intentionally dumb by discouraging inside trading. How’s that for astute jurisprudence?
So how do we avoid investment pitfalls like “it takes a thief” and “smoke ‘em if ya’ got ‘em?”
By getting real.
Getting real means putting your money in the mattress. At least be satisfied with a savings account or longer-term certificates even though the interest you can expect from these is minimal.
Getting real means living within your means. It means buying less and buying quality. It means buying, whenever possible, from people you know.
Look, life is gamble enough. If you want risk, jog downtown where the air is at its worst, or better yet, take a politician at his or her word. That should get you over the hump.
My ‘get real’ investment strategy is not designed for those needing to thrill seek their way to riches. Rather it is for those who want to get comfortable with being comfortable.
It is for those of you out there who, like me, still think Bre-X is much closer to soap than it is to gold in them thar hills.
So if getting rich quick with little or no effort is what you are after, always be prepared to take a bath.