BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow...

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Dozens of South Florida senior citizens have lost millions of dollars of their savings because their brokers bet wrong on risky mortgage-backed securities after promising them a stable investment. Coral Springs lawyer Darren Blum said Tuesday that his firm, Blum & Silver, is representing about 25 investors who had invested $20 million with Brookstreet Securities, a California firm that has brokers in at least a half-dozen South Florida offices. Many investors are planning legal action to recover their losses, and for damages and attorney's fees. The Securities and Exchange Commission and brokerage regulator NASD are reviewing Brookstreet's financial records and the firm has started shutting down its operations. The seniors invested in securities called collateralized mortgage obligations, or CMOs. Some independent brokers working in Brookstreet offices pitched the CMOs to wealthy seniors at dinner seminars and condominium meetings. 'They presented these as very safe, like a bond, paying 7 to 8 percent,' Blum said. The CMOs the brokers invested in, however, were complex and highly speculative, he said. Investors also received inaccurate brokerage statements that overstated how much they had in their accounts, Blum said. Brookstreet has said the money was lost in part because of too much securities trading on margin, or borrowed money. The value of the CMOs declined, Brookstreet said, as the so-called subprime mortgage market worsened. The firm that administers Brookstreet's accounts, National Financial Services, then demanded to be paid for the investments bought on margin. The margin losses mean that investors not only lost their funds, but could owe money that was borrowed to trade in their accounts. Blum said he talked with one client Tuesday who has about $12 million in margin losses. One of Blum's youngest clients is Gail Fisher of Boca Raton. After her husband died in 2001, Fisher, 54, was looking for a safe investment that would give her steady income to help pay for expenses, including college education for two children. Several months later, she heard a Brookstreet broker based in Coral Springs give a seminar at the Boca Raton condo development where her 87-year-old father lives. She was told that the investment was a mix of CMOs and mutual funds designed to work like a seesaw. Fisher initially invested $410,000, then $50,000 and later $60,000. Her father invested $50,000. She was receiving monthly income of about $4,000. Fisher now thinks that money was being paid out of her principal and that the vast majority of her investment is gone. She said she received brokerage statements that, while somewhat confusing, indicated that her investment was safe. Last year, Fisher's accountant told her he was troubled by the statements and urged her to have another financial specialist study them. That specialist 'took one look and said, 'You have to see a lawyer,'' Fisher said, sobbing as she spoke. 'He couldn't believe what [investments] they had me in.' With that out of the way even I am stunned by a $12 million in margin call. I don't think I would wish that on anyone. How can any company let losses get that far away? Of course we all know the answer to that: greed and fraud. Clearly these investments were not at all suitable for anyone let alone someone with a clear goal of capital preservation. Will it matter? Of course not. Sure, there will be lawsuits. Perhaps someone goes to jail over this. Perhaps. But that will not restore a $12 million margin call. Nor will it make right the woes of Gail Fisher or anyone like her. . Add that to the growing list those refusing to comment. At the top of the list are Bear Stearns and Merrill Lynch, both refusing to comment on recent happenings. The sad thing is this is just the beginning of what is to become a long trail of tears. Expect to hear more stories like this. A lot more. The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.