What My Mom Taught Me About Investing – That Wall Street Couldn’t

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of renowned author and former Wall Street insider, Nomi Prins. Every day, Nomi shines a light on a massive wealth transfer she calls The Great Distortion. That’s the true cause of the permanent disconnect she sees between the markets and the real economy. And she shares ways you can come out ahead, if you know where the money is flowing. You’ll find all Nomi’s Inside Wall Street issues [here](. If you have questions or comments, send Nomi a note anytime [here]( or at feedback@rogueeconomics.com. What My Mom Taught Me About Investing – That Wall Street Couldn’t By Nomi Prins, Editor, Inside Wall Street with Nomi Prins There are moments in life that define your path. Today, I want to share one of those moments with you. I was a managing director at Goldman Sachs at the time. But it didn’t happen in my office at the World Trade Center… Instead, it was a lesson I learned from my mom. It changed my life forever. And I believe it could have implications for you and your money. Let me show you how… Recommended Link [Market Wizard who made $95 million for his clients in 2008 – and predicted the 2022 collapse back in January – reveals his strategy:]( [image]( The One-Ticker Retirement Plan How to make all the money you need – in any market – using a single stock. [Click here for the name of the ticker…]( -- A Twisted Story On Tuesday, I wrote to you about [keeping patient in times of market turbulence](. Today, I want to write to you about other tactics to help you become a better long-term investor. It has to do with my mom, and a broker at Smith Barney two decades ago. Now, my mom is a smart, independent person. So, when she decided to invest her retirement funds with a brokerage firm called Smith Barney, she didn't ask for my opinion. Smith Barney was a prestigious institution. Its history went all the way back to 1873. You may even recall its motto from a TV commercial in the 1980s. In it, actor John Houseman said: They make money the old-fashioned way. They earn it. All that was before a telecom company called WorldCom went bankrupt on July 21, 2002. And not quietly either. [Featured: Financial genius reveals how to buy all the stuff you want – without paying for them the usual way]( I chronicled the rise and fall of WorldCom in my book, Other People’s Money. It’s a twisted story. This was the biggest corporate bankruptcy in U.S. history. WorldCom had assets of $107 billion at the time. In its wake, WorldCom left a cesspool of $11 billion in accounting fraud. Its former banks – including Citigroup, Bank of America, and J.P. Morgan – settled lawsuits with creditors for $6 billion. And its CEO, Bernie Ebbers, served nearly 14 years in jail. Recommended Link [Expert reveals startling new prediction about America’s future]( [image]( Former Goldman Sachs Managing Director Dr. Nomi Prins has a new kind of prediction. She believes there’s a strange phenomenon ‘distorting’ America’s financial system. If you have more than $1,000 in the bank, this could be the most important interview you see in the next 60 days. [Watch her bombshell prediction for America’s economy now.]( -- My Mom and WorldCom Before WorldCom went bankrupt, three things happened. First, it bought a lot of other firms, after the Clinton Administration passed the Telecommunications Act of 1996. WorldCom’s stock rose from $16.50 to a peak of $62.30 in September 1999. Second, a famous telecom analyst and managing director at Salomon Smith Barney wrote glowing research reports about WorldCom’s financial health. This was even as its stock was bucking and it was announcing large accounting revisions. His name was Jack Grubman. And third, WorldCom’s stock began plummeting into bankruptcy, as you can see in the chart below. If you remember the book Liar’s Poker by Michael Lewis, you’ll know that Salomon Brothers was big in the 1980s. (I’ll tell you my Salomon Brothers’ liar’s poker story another time.) But what you might not know is the incestuous relationship between Salomon, Smith Barney, and Citigroup. [Featured: Strange Force Strangling America’s Middle Class?]( Salomon Brothers merged with Smith Barney in 1997. Then, Travelers Insurance bought the combined company. And Citicorp merged with Travelers Insurance in 1998 to become Citigroup. Yes, all that merging and name-changing can make your head spin. But here’s why I mention it… Citigroup was significantly involved in WorldCom at the investment banking level. At the time, WorldCom was struggling to pay its debt. And as it turned out, it was also cooking its books to hide its true condition. While all that was happening, my mom’s broker was urging her to invest in WorldCom stock. She followed his guidance… and invested nearly half her retirement fund. This happened during the months before WorldCom shares took a nosedive. She doesn’t remember the exact dates, but shares were already dropping steadily. At the time, it might have seemed like a golden opportunity to “buy the dip.” After all, on the surface, WorldCom looked like a world-class company. And it’s not hard to imagine that her broker might have painted that picture for her. But it turned out to be the worst financial mistake of her life. And the “dip” in the case of WorldCom was not related to overall market behavior – but to fraud. From its peak in 1999 to 2002, WorldCom shares plunged 99.1%. In the summer of 2002, the company filed for bankruptcy. As a result my mom lost nearly half of her retirement funds. She did not tell me this until months after WorldCom’s bankruptcy. She was very upset. But she wasn’t the only one who lost money. Investors in WorldCom stock lost a total of $175 billion. Recommended Link Live from the streets of South Florida… [America’s boldest financial experiment]( [image]( “Watch me test a little-known financial move, on the fly, to pay for all my purchases today... Including my wife’s expensive gift from Nordstrom.” - Jeff Clark, Millionaire financial genius [Click here to see what happens!]( -- Don’t Make the Same Mistake My Mom Made Here’s why that makes me so angry. First, my mom lost that money by trusting a broker to act in her best interest. She didn’t ask me for advice on the situation, even though I was an executive at Goldman Sachs. She didn’t think she had to. She trusted her broker. Second, there was the incestuous relationship between Salomon Smith Barney and Citigroup. It was such that certain brokers could convince their customers to purchase stock in companies that were heading south. Just like my mom’s broker urged her to buy WorldCom. They could tout internal positive research as a way to encourage retail customers to buy that stock. Remember Jack Grubman, managing director at Salomon Smith Barney? He maintained a “buy” recommendation on WorldCom even as it dove from its peak of over $60 a share in 1999 to $7 a share in 2002. On February 8, 2002, he even reiterated his “buy” rating, according to Salomon Smith Barney research reports. That was just a few months before WorldCom declared bankruptcy. That was one major reason that my mom’s broker used to convince her to buy WorldCom stock. And this is why, when my mom told me about her experience, it was a defining moment in my life. By that point, [I’d already witnessed the horror of 9/11 firsthand](. I was sick of the greed and corruption on Wall Street. I resigned from Goldman Sachs just before my mom told me what happened to her. But my mom’s experience was the final push I needed to choose the next path of my life. From that point forward, I vowed to help people like her to avoid these situations. I’ve made it my life-long mission to reveal how Wall Street really works, so that you can arm yourself and prosper from knowing what I know. And from knowing what I learned from my mom. What This Means for You and Your Money Today, the historic Smith Barney name is no more. In 2009, Citigroup sold part of its Smith Barney retail brokerage business to investment bank Morgan Stanley. That combined company – or “joint venture,” in Wall Street speak – was called Morgan Stanley Smith Barney Wealth Management. But, in 2012, Morgan Stanley dropped the Smith Barney name. It simply had too much baggage. What my mom learned from her experience with Smith Barney is that you have to be wary of brokers. Especially ones that have an institutional relationship with the company they’re recommending. So, here’s my advice on your brokerage accounts, especially for your retirement funds: 1. Be wary of brokers – even the big ones. It’s best to keep your retirement funds with companies that aren’t owned by any mega-banks. That’s a good way to know that the recommendations they offer you aren’t tied to positions those banks might have, or might publicly endorse. These independent brokerages include Ameriprise Financial, Advisor Group, Raymond James, and LPL Financial. 2. Don’t put all your investment eggs in one basket – and don’t invest it all at one time. Spread your risk, even when you’re investing in what seems like an amazing opportunity. Don’t invest all your capital on a single name or idea. And invest in small increments, rather than all at one time. Instead, consider investing half of what you’d allocate to that name now, and half in a few months, or when you see a dip. You can also consider investing smaller amounts over a longer period of time. This is what we call “legging in,” or “dollar-cost averaging.” None of us can time the market with 100% accuracy. And none of us can get every investment right. This sort of approach can help you protect your nest egg if one of your investments doesn’t work out. Until tomorrow, [signature] Nomi Prins Editor, Inside Wall Street with Nomi Prins --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=Inside Wall Street Feedback). --------------------------------------------------------------- MAILBAG Nomi’s recent writings on the global water crisis (catch up [here]( and [here]( have sparked a lot of conversation … In Monday’s mailbag, we asked you: “Does Congress need to look at building more water desalination plants?” Readers respond with their thoughts… Yes, Congress needs to allocate money to help build desalination plants. People complain the rising oceans will wash away many cities, so taking water out of the oceans will not hurt anything and will help with water shortages. – John D. I live in Perth, Western Australia (a city with 2 million inhabitants). 40% of our water supply comes from two large, coastal desalination plans, running largely on renewable power. A third desalination plant is being planned. Desalination makes perfect sense, especially if run on nuclear power, which is cheapest if a plant is producing 100% power all the time. So in times of low energy demand from the network, the surplus energy can be diverted to desalination at a low cost. The U.S. needs to embrace desalination on a large scale and pipe it even over long distances to where it is needed. – Paul K. Do you have similar stories to Nomi’s mother where someone gave you bad counsel? What’s the best piece of investment advice you’ve ever gotten? Write us at feedback@rogueeconomics.com. 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