<l...@g...com> wrote
re an investment in late 2007
> At the time, the WaMu bonds were investment grade and
> there was no way
> to know what was going to happen.
> The problem is, as the WaMu situation got more dicey and
> the bonds
> started to get riskier, my adviser reassured me that there
> was no need
> to worry, WaMu would never go under, worst case it would
> be bought by
> some other bank.
snip
> is there any legal recourse when an adviser
> doesn't give you advice that's inline with your risk level
> and you
> suffer as a result?

My answer would depend on how much you originally invested.
If we are talking about, ballpark, $15k or less invested in
the WaMu bonds, then I would be less inclined to protest the
advisor's actions. Given small amounts such as $15k or less,
diversifying with bonds could be said to be tricky, due to
transaction expenses of buying several companies' bonds.
OTOH, if the amount was this low, arguably the advisor
should have put you in a bond mutual fund. On the third
hand, the yield likely was not as good on the bond mutual
fund. Did he compare the two yields (WaMu bonds and a bond
fund) for you? Did you say anything about preferring the
higher yield?

If we are talking about more than about $15k, then I agree
with dapperdobbs and kastnna's point re diversifying.

But, the situation is further complicated by the difficulty
of reading financial institutions' accounting statements. I
do not mean that these are complex (though they are). I mean
that even those well acquainted with the complexity were
fooled. Warren Buffett bought around half a billion dollars
of Bank of America stock in mid-2007. It declined by around
50% in the next year. It has recovered some but it is still
far below Buffett's purchase price. If Buffett and his
people could not see the massive writedowns (for commercial
banks) on subprime mortgages coming, who could?

This argues for exculpating your advisor. It is an anomalous
time. Many (most?) are taking a beating in their portfolios.
Nearly everyone is furious and looking for satisfaction.
That bailout bill that went to the House today failed IMO as
much because people do not trust anyone right now. The
merits of the bill being a viable solution to the credit
crisis were hardly considered.

We all "want our money back." The wise among us will
concede, "I knew there were risks. Black swan events etc. do
occur. Easy come, easy go. Here is what I will do next time
to avoid this loss."

For the little it is probably worth, the following site says
that the FDIC will pay 30 cents on the dollar for some, but
not all, WaMu bonds. I would not get my hopes up; just
noting that it's worth checking.

http://www.philly.com/philly/blogs/inq-phillydeals/D
id_FDIC_doom_Wachovia_by_stiffing_WaMu_investors.htm
l

Elle
Individual Investor; I am not paid for my comments.

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