Looter Mentality - Posted by Tony Colella
Posted by Tony Colella on October 15, 2006 at 22:16:53:
I am a bit concerned by your post stating that the ?easy money mentality? (and the assumption that a return of 18% is a risky venture)necessitates a practice of Lender Beware, as if they should expect to lose their money and almost be surprised if they do not.
There are some very basic faults with this line of thinking. The idea of high returns requiring high risk is what keeps self help investment books on the shelves. High returns do not (or should not) require high risk for a professional investor. If the risk is that high, they simply don?t do the deal. Success comes in controlling the deal so that principle money invested is not at risk and that multiple exits are available that will protect that money in the event things do not go according to plan. By taking calculated risks the investor is able to reap actual, in pocket profits as opposed to a non- professional investor who takes his or her dollar and a dream and buys a Lottery ticket or speculates (hopes) that the retail house they just bought as an ?investment? will appreciate like their realtor suggested.
The ?easy money mentality? you mention is the Lottery mindset, not an investor?s mindset. The lottery player understands that the odds of them receiving a huge profit with no effort on their part is slim to none. These people are not investors. They are gamblers or dreamers but not INVESTORS. They do not EXPECT to receive a profit, they only dream of it. Even more poignant is that they do NOT expect to see their INVESTED DOLLAR(S) ever again. In fact they expect to lose it. You cannot remain a full time investor for long if you expect to lose your investment dollars. That is why risk assessment is conducted, controls put in place in the event things go wrong naturally (without theft or fraud).
There is a reason Lottery players and ?easy money? investors don?t quit their day jobs unless and until the unlikely event they actually hit the lottery. The full time investor cannot gamble and keep food on the table for too long while waiting for the dream to come in.
When corporate employees such as those of Enron etc. invest in their pension and retirements through the company they do so expecting the money to be placed in safe hands. When those hands loot the safe, the public and the employees (rightfully so) cry out. When that money is not paid back, we are angered are we not? Should we simply tell them instead, ?remember folks, easy money means high risk and since the money was invested with little investment effort on your part, you took the gamble??
If your trusted friend and attorney borrowed your car and after several months of you asking for him to return it without him doing so, would you not file criminal charges against him to get your car back? How valuable is that car compared to $500,000 in cash?
If we follow your post?s train of thought, wouldn?t we have to conclude that if someone lends money secured for say, an 18% mortgage (implying high return/high risk) and the money is not repaid, the borrower should be excused from repayment and recourse because it?s ?all part of the gamble?? There are investments, speculations and gambles. Your comments blend and confuse them; leading to the same mentality that I believe allows people like Titus to sleep at night.
Tony