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What the Heck are Some People Thinking?
By JLP | February 15, 2007
I don’t mean to sound judgemental but what was this guy thinking?
One of the cover stories ($) in today’s Wall Street Journal is about a Florida condo developer who got in over his head and is now in jail, charged with 23 counts of federal mail and wire fraud. As bad as that is, what’s worse is this part of the story (with the really important part in bold):
Mr. Hussain’s rise and fall illustrates one of the hazards of a frothy property market: inexperienced developers get in over their heads and drag unsophisticated investors down with them. “Schoolteachers, cops, doctors, priests, everyone thought they were Donald Trump,” says Lewis Freeman, the court-appointed trustee administering Main Street’s bankruptcy proceeding. Mr. Hussain’s company, he contends, was a “microcosm of the total market. You had a lot of unqualified people getting easy money and able to go into businesses in which they didn’t know what they were doing.”
Mr. Hussain’s 300 or so investors face potential losses of up to $400,000 apiece. Alan Cayo, 76, a retired Army officer who says he invested his “entire life savings” of $280,000 with Mr. Hussain, conjectures that the developer crossed the legal line only after financial problems began mounting. “It was incompetence, fraud, plus the market going down — a triple whammy,” he says.
Did you see it?
It’s sad how the universal wisdom of “not putting all your eggs in one basket” often falls on deaf ears. Seriously, are there STILL PEOPLE who don’t understand this? At the very most, this guy should have only invested 5 – 10% of his life savings (the very most) in something like this. Surely this fellow was expecting a huge payout when he decided to take all of his money and invest it with Mr. Hussain. I’m not knocking opportunities. Sometimes true opportunities come along and it is prudent to invest in them. However, it is NEVER prudent to invest ALL your money in one deal. That never makes sense no matter what the expected payout is.
Why is it we keep hearing stories like this? Greed, perhaps? I suppose it is human nature to look at an opportunity and only see the good things about it and ignore the risk involved. It’s too bad this guy has to be a victim of his own greed.
Topics: Miscellaneous | 7 Comments »
February 15th, 2007 at 10:23 am
The incompetence was Mr.Cayo’s. You’re 76 years old! Like JLP said, you shouldn’t be putting your life savings into ANYTHING. And I include Treasuries in that category; not because I think they’re anything but bulletproof, but because you need to grow capital, even at his age. Anyway, clearly this investor was simply greedy.
February 15th, 2007 at 12:30 pm
Far too many people in my age group don’t even recognize the huge benefits of saving money for retirement …. much less putting any money saved into one basket
February 15th, 2007 at 12:31 pm
maybe he attended kiyosaki and trump’s seminar sessions.
February 15th, 2007 at 12:51 pm
76 years old ! He should be somewhere chillin in the carribean. I would not be thinking about investing at that age. I will have all I need. I guess he got greedy.
February 15th, 2007 at 6:36 pm
I’m not sure that ‘greedy’ is the best way to describe the victims; that would imply that their desire for money led them to ignore the risks. It seems more likely to me that the converse was true – their inability to evaluate risks led them to put money into what they (errantly) thought was a safe investment.
February 18th, 2007 at 9:33 am
[...] What the Heck are Some People Thinking? by JLP @ AllFinancialMatters.com: JLP makes a very important point with an example of a scammer who robbed someone of “his entire life’s savings“. Diversify people! For those who still don’t get it, here is the meaning of the word *diversify* according to Answers.com: [...]
February 18th, 2007 at 10:21 pm
Notice he wasn’t a *Navy* officer
Besides, I’m sure he’s getting a pension and his Social Security check. He’s not hung out to dry, perhaps, but probably pretty irked.