8/13/2018

Locally Smocally

An acquaintance in our little town is trying to promote a “buy locally” program that is loosely based on variations of the food co-ops and small business crowd-funding. It’s a pretty hard sell pitch, which always puts me on guard. On top of that the argument that “the national system is rigged against the small investor, so you should really like investments that you can talk, personally, to the owners and employees” has a scary, familiar ring to me.

Talking to a small business owner is pretty useless, information-wise. I’ve worked for a half-dozen small businesses and what I learned from that experience is that con artists don’t limit themselves to Wall Street. That’s where the Big Cons live, but for every Big Con there are thousands of Little Cons and most of them work their scams in small businesses of a wide variety: from home improvement contractors to car dealerships to investment councilors to small town banks. The thing they all have in common is that they don’t report to anyone until they are on their way to jail or bankruptcy court.

Not many years ago, an acquaintance from high school demonstrated this too well for me when his “investment company” was discovered to be nothing more than a Ponzi scheme and a large number of investors discovered they were broke. I’ve been a low-key investor since the late 1970‘s and I’ve had more than my share of ups-and-downs over those years, but I have never lost everything with any of the mediocre-to-not-awful big brokers I’ve worked through. Merrill Lynch was pretty terrible back in the 1980’s when their “advisors” were steering small investors into whatever heavily discounted piece of crap their executives were shilling for, but it has never been difficult for me to ignore financial advice from people who are not rich. The one decent tip I got from my Merrill Lynch broker was Marvel Entertainment, when that company went public in 1986. We didn’t get out of the Reagan years without a collection of recessions and stock crashes and my Marvel stock didn’t do any better than most of the rest of the economy. I dumped it to help finance a house in Colorado in ‘91 and I’m not sure which “investment” would have done better. I did fairly well with the house. Marvel stock really hit the trashcan in the mid-90’s.

MSCM dumpsterI was in some kind of management capacity in every small company I worked for, except the last one; McNally Smith College (which suddenly, but predictably, went broke in late 2017). By then, I’d decided that I wouldn’t make another nitwit into a millionare and that I’d never again try to manage people in a dysfunctional organization. (The top levels of mismanagement at McNally Smith College was a colection of dysfunction that would have embarrassed Trump. I knew associating closely with that crowd would be self-defeating.) My experiences at the other small companies were relentlessly discouraging; from outright corruption and misrepresentation to the usual series of fairytales designed to keep employees from bolting to more secure or better-paying employment. From the inside of all but one of those companies, no one who worked there would invest a penny of their own money regardless of the promises made by ownership. I didn’t even trust most of those employers to honestly manage 401k funds and my IRAs are the reason I’m retired today. My employer funds consistently lost money, even the Fortune 100 employer IRAs were mediocre investment vehicles.

kickstarterSo, “investing” at the local level rarely gets past the level of “crowd funding” or panhandling. There is no SEC, as weak as that organization occasionally becomes, to make even a haphazard effort to monitor company finances. There is no good reason to imagine that a small business owner would disclose bad news to potential investors. The “investment” is not liquid in any fashion, as I can attest to since I still own some weird and obscure portion of one of my past employer’s business that I’ve been unable to cash out of in 40-plus years. In the end, it’s just crowdfunding/electronic-panhandling and I can always think of better places to put my contribution money than small businesses. It’s not like our government is doing such a good job of protecting democracy, providing a safety net, ensuring “liberty and justice for all,” or even managing national security that there are no more important causes so I might as well try small business crowdfunding.

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