Steve Foerster, a finance professor and investment historian, to talk his latest book, Trailblazers, Heroes and Crooks: Stories to Make You a Smarter Investor.
Steve shared insights into famous financial scandals, such as Bernie Madoff's Ponzi scheme, the Bre-X gold mining fraud, and the Salad Oil Swindle that almost toppled American Express. He highlighted key lessons from these events, including the importance of skepticism, recognizing red flags, and understanding how fraudsters exploit exclusivity and credibility to deceive.
These historical stories underscore timeless lessons in vigilance and sound investment practices. Today we discuss...
- Steve Foerster, professor of finance and investment historian, discussed his background and books, including Trailblazers, Heroes, and Crooks and his work on the biography of Nobel Laureate Bill Sharpe.
- The psychology of exclusivity and trust in Madoff's scheme, including his reputation as NASDAQ chairman.
- The Bre-X mining scandal of the 1990s, detailing fraudulent gold sample salting, conspiracy theories surrounding Mike De Guzman, and the challenges of evaluating mining investments.
- Mark Twain's observation on mining, "a hole in the ground with a liar on top," was used to underscore skepticism in speculative industries.
- The 1960s Salad Oil Swindle, focusing on Tino De Angelis' fraudulent practices and their near-collapse of American Express.
- Buffett's significant investment in American Express, based on its strong reputation despite the scandal, resulted in a two-and-a-half-fold return within 18 months.
- Research and perseverance can lead to great returns, as Wall Street tends to sell indiscriminately during tough times.
- Warren Buffett's support of management during a crisis helped American Express recover and solidify its reputation.
- The tension between short-term profits and long-term value was central to Buffett's approach, focusing on long-term growth.
- Hetty Green, a 19th-century investor, was a pioneering value investor who predicted market trends and became a major player in railroads and mortgages.
- During the Panic of 1907, Hetty Green predicted the failure of a major trust company and later lent to New York City, preventing bankruptcy.
- Bobby Bonilla's deferred payment contract with the New York Mets showcased the importance of understanding time value of money and opportunity cost.
- The story of Cristiano Ronaldo’s snubbing of Coca-Cola at a press conference led to a $4 billion market drop, but it was actually due to the stock’s ex-dividend date, not his actions.
- The Coca-Cola stock drop was an example of correlation not equaling causation, teaching the importance of distinguishing between the two in investing.
Today's Panelists:
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