How to Get a One-Up on Wall Street!

 

The Hippocratic Oath is taken by doctors and other healthcare professionals swearing to practice medicine ethically and promising not to do more harm than good when treating a patient.

It’s a shame there isn’t a similar oath taken by government leaders, bankers, brokers, traders, and regulators, among many others too. Clearly the financial markets are in need of a refresher course in the subject of ethics.

I’m in New York this week to consult with a law firm regarding the MF Global case. They hired me to help them analyze the situation and advise them. In my opinion what MF Global, and in turn the CME Group and Commodity Futures Trading Commission have done is a truly mind boggling betrayal of customer trust and fiduciary duty.

Advertisement

I’ve also had the opportunity to walk around Wall Street, where I chatted with the Occupy Wall Street folks, and really listened to their stories.

I talked to many people who have been deeply impacted by the poor decisions made by government and business leaders, reckless regulators, and corrupt banks.

Here is my NYSE badge for access to the trading floor on Monday. The poem was written by Chris and his wife Tenisha. They sell the poems for $1 each to get a hotel room for themselves and their three small children.

A wide array of once-trusted and respected institutions have shown a general disregard for basic ethics and moral obligations, thereby undermining the public’s trust, and confidence. You reap what you sow.

Navigating the Moral Hazards

Many of the media reports say that the vast majority of Occupy Wall Street protestors are a lost generation of “hippies” out for free love and aimless protest. But from what I can see, that’s way off base. What we have are a lot of people who feel disenfranchised from the American Dream, which has now turned into the American nightmare for many.

The fact of the matter is that the protests may not be well organized. But the underlying distrust of financial and government institutions has spread to all levels of the socioeconomic scale, and the protests reflect that.

The “99%” as the protestors call themselves, are angry over foreclosures and lack of due diligence by banks, lack of a proper healthcare system by a broken government, and an almost nonexistent job market. The list goes on and on.

One young lady desperately said,

“I have no job and no dreams. This is slowly becoming a living nightmare. I had a minimum wage job, in another city, but I couldn’t support myself … I played by the rules. I got good grades, went to college, and got a degree.

“I graduated in 2009, to no prospects. Nothing for me. Fast food joints don’t even call me back. I feel HOPELESS. I’m already depressed, untreated. I often find myself thinking of suicide, because I see no future for me.”

We must hold government and corporate leaders to a higher standard and proceed with caution.

Wall Street, Congress, banks and financial institutions must find their moral compass, so long buried, and use it to navigate out of this disaster and regain public respect and trust. Otherwise, America as we knew it may never be the same.

Having been in the trading and brokerage arena since 1988, I’ve seen many firms come and go. Often the biggest, most trusted firms are the ones most at risk. Names like Enron, Worldcom, Tyco, and MF Global come to mind, just to name a few.

So how do you protect yourself and your loved ones when even the biggest firms can implode?

One word is the key: Diversification.

The old saying “never put all your eggs in one basket” is an absolute cardinal principle for your money.

The Rule of Tens …
Your One-Up on Wall Street

As a general rule, I suggest a well diversified portfolio, never allocating more than 10% of your overall investing pie to any one sector or with any one financial institution. In other words, only 10% of your total portfolio goes into commodities, another 10% maximum to bonds, 10% to stocks, and on and on.

Of that 10% I also believe you should invest no more than 10% in any one particular sector. So in other words, of the 10% you allocate to commodities only put a maximum of 10% (of the overall 10%) into any one particular commodity (gold, oil, cocoa, etc.)

This rule of tens is my own personal guideline. Yours might look a little different based on your personal goals and risk tolerance.

As Wall Street and banks struggle with the systemic problem of ethics and moral hazards, use the tool of diversification to help avoid or diminish the risk. It’s the best medicine for the ailing markets and to protect your wealth.

Regards,

Kevin Kerr

P.S. For the commodities portion of your portfolio, you might consider our Global Resource Hunter. In each issue Sean Brodrick and I give you comprehensive research that is 100% free from conflicts of interest. Sit back, turn up your speakers and watch this video to learn more.

http://feedproxy.google.com/~r/UncommonWisdomDaily/~3/vJ2T3bWWn94/how-to-get-a-one-up-on-wall-street-13233