Wednesday, November 4, 2009

A bank to reckon with...

Cascade Bancorp just seems to be in the wind these days.

I've never paid attention to a single stock before, but I doubt most stocks experience the gyrations that I've observed with CACB over the last month or two. It appears to me that there has been a real effort to prop up the stock everytime it falls below a certain level -- or perhaps it's just people picking up what they think is a bargain.

I've already commented on the Heads I Win, Tails You Lose bet that the big investors seem to be making.

Anyway, Linda and I were renting a storage unit recently, and out of the blue the owner mentioned that he and a friend were planning to "invest in Bank of the Cascades."

"Really?" I exclaimed. We talked about it for awhile, and shrugged it off as a relatively cheap risk.

That's example 1.)

Example 2.)

I've had a bit of a bet with a friend for a couple of months or so; I told him that I thought a couple of the local institutions would be taken over by the FDIC before the end of the year. If both happen, he owes me a CD. If neither happens, I owe him a CD. If only one happens, we break even.

Yes, CACB is one of them. I know, I know. I'm an SOB for betting against a local bank. Sorry.

Anyway, he came in the store the other day laughing.

"What are you doing? Are you talking down Bank of the Cascades on your Blog?"

"Well, I talk about it occasionally," I admitted. "Why?"

"Because it's in the news all the time!"

(P.S. With the FDIC giving the bank another 60 day warning, I think I'm going to lose the bet -- technically.)

Example #3.)

Finally, Linda and I went to see our financial adviser yesterday, and he was explaining his strategy for investing, and he said, "Say you wanted to invest in Cascade Bancorp...."

Linda just looked at me, and we both started laughing.

"O.K. O.K.," he joins us. "That may be the wrong example...."

Anyway, all these events were more or less spontaneous, unprompted by me.

So it's in the wind....for what it's worth.


RDC said...

Instead of using the term financial advisor you might want to use the term financial services salesman. The reality is that they are in the business of selling services and as a result they have an interest in selling those services. Just as real estate brokers have an interest in selling houses.

If they can sell those services and have their clients make money then great, but they make their money weither you do or not. And what they make comes get subtracted out of what you make on your investments.

Duncan McGeary said...

This is a VERY big subject for me right now, and I'm still trying to figure out how to approach it.

I've been sort of nibbling around the edges.

I don't disagree with you; but my family has had this particular financial adviser firm for 30 or 40 years now....

RDC said...

The point that I am making is keep in mind that an advisor will be biased to their business. They might give good advice but they will be biased. Which means that depending upon the business model they will 1. Want as much of the funds with their firms as possible, 2. As much under their management or 3. recommend products they sell. While they might be making good recommendations within that framework (they also might not) it may mean that your are not getting recommendations that may be to your benefit.

Some things to look for are the nature of the mutual fund recommendations and if they are loaded or have fairly high annual costs involved (if you have a percentage of your investments in an index fund, it will almost always be cheaper to have that money with Vanguard instead of another firm). There is also the question on allocation. One mistake is that quite often they encourage more aggressive behavior then might be prudent. As in everything in Stocks and Bonds. While cash might not earn much, having a percentage in cash and cash equivalents mean that you have the ability to buy in at a discount whenver the market drops a large amount.

So when you enter into such discussions use them as a source of information, but not the only source. Investigate the recommendations, not just take them at face value. Ask difficult questions about their recommendations vs other alternatives where some of the money might be kept elsewhere and see how they respond. Last but not least do not keep all of your eggs in one firms basket.

The person that has your interest most at heart in financial matters is you. Make sure the decisions are your decisions and not rubber stamps on a financial advisors recommendations.

RDC said...

One other note some very wealthy families had been very happy with the services they had received from Madoff for a number of years as well. Firms change, advisors change and even good firms can have bad apples.

Duncan McGeary said...

What would you suggest, RDC?

You have to go through someone...

Duncan McGeary said...

Sorry, should have read it through before I responded.

Advice is just advice. I'm going to be doing a lot of I always do.

RDC said...

I use different institutions. I have an account with Vanguard to take advantage of their low fee structure for index funds, I have an account with a low cost brokerage for access to ETFs, other fund families, stocks, bonds and CD's. I have accounts with different banks to take advantage of different rates for money market accounts. The key element from my perspective is that no one other than myself can move money around and make investment decisions (they can make recommendations, but not decisions).

I have found an investment advisor can be good for identifying investment strategies and for risk management (largely asset allocation type recommendations).
Asset allocation is probably going to be your most important decision.

They also can be good at helping one organize finances and get some reality on what it will take to accomplish future financial goals. Those are the ones that start out by giving you a questionaire to fill out about your finances and have a detailed discussion about your goals and risk tolerance, before getting to the how much money do you have to invest question.

mugmkr said...

Bank of the Cascades no longer sends return envelopes with the mortgage bill. Methinks that is a sign of how bad it really is...they make several hundred a month in interest on our loan but they can't spend a nickel on an envelope.