If only I would win the lottery ...

[Culture]

... all my problems would be over ::

http://www.jsonline.com/story/index.aspx?id=594236

 

[Texas Proud]

Let's see... first mistake was selling his future payments.... from the one that I saw when I worked in trust... it was discounted 40%.

We made the guy sign a piece of paper saying he had legal counsel, know what he was doing, that the bank gave him no advice etc. etc... he still sold...

 

[FinanceDude]

... all my problems would be over ::

http://www.jsonline.com/story/index.aspx?id=594236

But at least Smith Barney made out ok.............. : :

 

[crazy connie]

I think his 1st mistake was trusting a financial advisor! With 98K a year he could have lived like a prince and banked the excess! The greed factor kicked in and he wanted it all!

 

[Culture]

The greed factor kicked in and he wanted it all!

I think you have cut to the heart of the matter.

 

[Andre1969]

So how much, on average, does an annuity like that increase every year? I always thought that when you won a lottery and took the annuity instead of the lump sum, that the yearly payments were the same?

 

[FinanceDude]

So how much, on average, does an annuity like that increase every year? I always thought that when you won a lottery and took the annuity instead of the lump sum, that the yearly payments were the same?

You can get the settlement as a COLA annuity, or take a lump sum. About 95% take the lump sum..............

 

[Culture]

You can get the settlement as a COLA annuity, or take a lump sum. About 95% take the lump sum..............

In Texas, your choice is lump sum or a "straight" annuity (non-cola). I have no idea what percentage take the annuity, it is probably vanishingly small. I know the two or three times I have played (it make mathematic sense at about $100M ), the vendors automatically provide you the lump sum option unless you tell them not to.

 

[Olav23]

They should really force you to take an investing/financial planning seminar before you are handed the big novelty check.

I think google had some type of training for all of its employees right before they received their stock options windfalls. People prey on uneducated and unsophisticated folks, and it is all in all pretty sad.

I also feel this is in the same boat as the subprime and payday loans, annuities and structured products.

 

[Telly]

I hadn't heard of a COLA'd annuity as a choice. Just Lump-sum or straight annuity.

If I won the lottery, and it was a big amount, I'd probably take the annuity and just pay the taxes year by year.

'course, I'd have to play the lottery for any chance at winning!

There is nothing like a Rags-to-Riches-to-Rags story like the one above, to make us feel better about our own personal financial decisions
Why, I'm an absolute financial genius compared to that guy

 

[Milton]

The original article says:

But by 2000, he decided on a different approach: sell the future annual payments off to a private firm for an immediate lump sum - in his case, about $2 million - that he could roll into investments. He'd just live off the earnings and interest. "I figured I can make the money and still have all that money in the bank for the kids," Cicero said. "But it didn't work out that way."

Cicero's lawyer has alleged the advisers were "breathtakingly irresponsible" to put a lottery winner's windfall wholly into individual stocks. "Fifty to 80 percent of their income ought to be in bonds and other fixed-income investments," Stoltmann said.

Two points:

(1) It doesn't sound like anyone twisted his arm. He was greedy made an error in judgment and got burned. I don't see how that's anyone else's fault.

(2) Since when is it prima facie negligent for an investment advisor to allow a 65-year-old client to be 100% in equities? What evidence does this Stoltmann fellow have for his claim that a proper asset allocation model must include 50-80% fixed income?

They should really force you to take an investing/financial planning seminar before you are handed the big novelty check.... People prey on uneducated and unsophisticated folks, and it is all in all pretty sad.

It would appear that Cicero is a competent adult. As such, he has the right to make his own decisions. That implies that he also has the right to make his own mistakes. The alternative (mandatory investment education, or I.Q. testing) would be too paternalistic ('Big Brother' knows best) for my taste.

It may well be that there is more to this story than meets the eye. But at first glance, it is not readily apparent that Salomon Smith Barney has any liability.

 

[Culture]

It may well be that there is more to this story than meets the eye. But at first glance, it is not readily apparent that Salomon Smith Barney has any liability.

Of course, you are correct that we do not know the full story and we are somewhat shooting in the dark. However, I disagree with your implication that the preponderance of the evidence favors Smith Barney. When you hire a professional, it is not caveat emptor. Rather, the professional has an obligation to offer reasonable advise and educate the client. I know, because I happen to be one such professional. Would you expect a doctor to say to you "Let me know what pill you want and I will write a prescription." No.

Putting an uneducated investor 100% into individual stocks concentrated in one sector is ridiculous unless the adviser carefully educated the investor. Was his client willing to ride out a 50% drop in the market? Did he even know a 50% drop could occur? If the guy was not educated, or worse his advisor did not bother to ask, the advisor should be horse-whipped and his BMW seized.

BTW, most likely I need a global search and replace for "adviser" to "salesman."

 

[Mwsinron]

All this guy had to do was read up on things for awhile. Simply stick the money someplace safe until he had a clue of what to do with it.

 

[Khan]

A lot of men like to consider themselves real 'wheeler dealers' and will let the testosterone make financial decisions.

 

[Spanky]

Easy come ... easy go. Don't feel bad for him. He's still have enough money to live on despite his greed and egregious mistakes for trusting people who only want his money. I am not in support of the people who gave him bad advice. These people may suffer the consequences of their action later or in another life.

 

[wabmester]

It's not just lotto winners. Do you catch the NY Times article this weekend on the now-broke founder of two different public companies?

link

In 2000, over the course of the year, Mr. Hayden sold $45 million worth of stock, and continued to borrow against the remainder of his stock held by Robertson Stephens. Eventually, the loan was increased, first to $5 million, then $20 million. At one point, he borrowed as much as $30 million against the shares. Although his wealth existed mostly on ledger sheets, Mr. Hayden believed himself to have become supremely rich and lived life accordingly.

Mr. Hayden and his second wife, Storey, bought a 7,000-square-foot mansion in one of San Francisco’s wealthiest neighborhoods for $8 million. The Haydens spent a year gutting, renovating and decorating the house with a refined yet understated eye, putting Venetian plaster on the walls and blond oak on the floors. The Haydens also bought property in Sun Valley, Idaho, for $4 million.

Mr. Hayden put a down payment on a Gulfstream jet. He invested in several start-ups and started his own venture capital firm. He drove a Ferrari. Together with the television producer Norman Lear, he bought an original copy of the Declaration of Independence. He was invited to the White House.

Some of Mr. Hayden’s co-workers were taken aback by his excesses. “I was embarrassed for him,” said Wayne Correia, one of the original co-founders of Critical Path who left the company at the end of 1999. “It was the worst case of nouveau riche you can possibly imagine.”

....

To pay bills, Mr. Hayden is gradually selling off furniture and paintings. Yet he appears to harbor surprisingly little bitterness. “It’s better that way in the end,” he said. “Otherwise you focus on stuff that doesn’t matter.”

 

[NinjaPigeon]

I have no pity for these people. It's not that hard of a concept to work a calculator. Money on a ledger isn't the same as money in the bank.

 

[bssc]

If someone would like to hand me $5.5 million, I would be happy to blog on how I spent it.

 

[Milton]

Personal wealth experts say that although Mr. Hayden’s situation is an extreme one, it was not at all unusual for people whose wealth existed mostly on paper to live as if it were otherwise.

Ain't that the truth! Just look at all those people who think that the rising value of their homes is an excuse to go crazy with the credit cards.

Mr. Hayden trusted the people who inhabit that world of high finance to take care of him. He ... put his faith in the investment bankers that would make him rich. And they did. But his wild ride unraveled, and now he is assigning blame to those same bankers.

It's always someone else's fault. This is the sort of litigious, victim mentality that is sucking the lifeblood out of American productivity. Will society ever wake up and demand that people assume some personal responsibility for their own problems?

 

[donheff]

In the arbitration hearing, Robertson Stephens claimed that it had indeed presented hedging opportunities to Mr. Hayden, but he declined them. The firm said it also encouraged Mr. Hayden to diversify his holdings.

In a written statement about Mr. Hayden’s case, Bank of America said, “In a 21-page opinion, Mr. Chernick dismissed all of Mr. Hayden’s claims as meritless. That opinion speaks for itself.”

Sounds like Hayden definitely was suffering from "sudden wealth syndrome." No sympathy for someone who ignores advice and then complains that the advisor should have spanked him.

 

[FinanceDude]

In the arbitration hearing, Robertson Stephens claimed that it had indeed presented hedging opportunities to Mr. Hayden, but he declined them. The firm said it also encouraged Mr. Hayden to diversify his holdings.

In a written statement about Mr. Hayden’s case, Bank of America said, “In a 21-page opinion, Mr. Chernick dismissed all of Mr. Hayden’s claims as meritless. That opinion speaks for itself.”

Sounds like Hayden definitely was suffering from "sudden wealth syndrome." No sympathy for someone who ignores advice and then complains that the advisor should have spanked him.

I have run into a couple of individuals like this guy but with less money. I avoided both of them like the plague, even though they came from referrals. It's the "Superman complex", where you think you're bullet-proof............

This guy wouldn't have diversified if there was a gun to his head. Investment bankers and institutional folks who work with big money aren't stupid...........Although it's a sad story, I am reminded of the quote:

"Beauty is fleeting, but stupidity can last a lifetime".............

 

[thefed]

so...i assume this guy SOLD all of these shares after they tanked?