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Takeovers Mean Turmoil

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Recent news in the investment industry touched close to home in Nebraska. Charles Schwab is to buy TDAmeritrade, and move the headquarters to Texas. How many of the 2250 jobs will be left in Nebraska is uncertain. A lot of things will change.

The first shares of stock I ever bought were at the discount brokerage firm Joe Ricketts founded. At the time, the place had fewer than twenty employees. It was in a second floor walkup office in a second-rate building in downtown Omaha. The lobby had a most amazing gizmo: a little Quotron machine. You could punch in a stock symbol, and it would show you the current price.

Those prices were not in dollars and cents, but dollars and fractions. XYZ might be selling at 27 ½ , ABC at 9 ¼.

Before personal computers, before the internet, stock quotes were something you got out of the newspaper or called your broker for. The afternoon paper had noon prices; the morning paper had the previous day’s closing prices.

But in the Ameritrade lobby, a dozen patrons stood in an endless loop of a line, waiting for a turn at the Quotron. They punched the symbols in, looked at the prices (some wrote them down), then went to the back of the line to wait for another turn. Daytrading took more patience then.

Later, the firm pioneered getting information to the people by making stock quotes available from any touch-tone phone. (Kids, ask your grandparents what I’m talking about.) Then the internet made a lot more things possible.

It is not for me to judge the takeover transaction; it evidently makes sense to the people who are making the decisions. We will do our best to help affected employees, of course. We will always remember the typically American story of innovation and success that Ameritrade represents.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Expensive Lessons Threaten Teacher Retirements

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An amazing tale of mistakes and worse in the Omaha Public School (OPS) pension fund has been uncovered by the Omaha World-Herald. According to the paper, the fund went from being one of the best-performing funds in the nation to one of the worst.

The most surprising thing? The same issues you and we face in managing our own investments caused a lot of the grief.

• The fund sold stocks heavily at the bottom of the financial crisis, in 2008 and 2009, dramatically reducing its holdings at the wrong time.

• Decision makers sought ways to achieve above average returns without market volatility—almost always a tale too good to be true.

• The risks of alternative investments were poorly understood, not surprisingly. Mumbai real estate, international shipping, Kazakhstan oil companies and distressed housing in Florida? (At least they didn’t buy swampland, as far as we know.)

• When stocks rebounded, the fund missed out—while suffering with poor results from its new strategies.

We endlessly encourage staying the course, hanging in there, living with volatility, avoiding the stampedes, seeking the bargains… in fact, aiming to do the exact opposite of what the OPS fund managers did. It is not easy to do the right thing, but you, the best clients in the world, have shown perseverance and patience when needed.

It is unfortunate that the people responsible for management of the fund lacked the basic good sense that you possess. Clients, if you would like to talk about this or anything else, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

All investing, including stocks, involves risk including loss of principal. No strategy assures success or protects against loss.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.