Chapter 6
Diogenes’ Lantern
This is a true story. In 2007, a couple sold a townhouse in Park Slope, a neighborhood in Brooklyn, New York. The price of the townhouse had more than doubled in the five years since they bought it. It was a nice townhouse, on a wonderful block, with magnificent neighbors. But a more than 100 percent return in less than five years was too good to be true. Besides, the kids were getting older. They needed someplace greener and safer to play. So they sold the townhouse. The couple, their two kids, and their pug dog, moved from the city. They bought a rambling house in the country. They lived beside a river. They missed the city. But they enjoyed the extra space, the clean air, and the wad of cash they had received thanks to the real estate sale and some fortuitous business dealing. They were also lucky. The couple sold their townhouse right as the real estate market peaked. The money was too much to handle alone. Soon they got a call from a stockbroker offering to help. The stockbroker called himself a “financial advisor.” The couple’s private banker had introduced him. The private banker had worked for the husband’s parents for many years. She was trusted. The stockbroker was likable. The stockbroker soon presented a plan after a few telephone calls.
The bulk of the money was invested in six or seven mutual funds. A few hundred thousand dollars were invested in a “bond ladder.” The idea was that stock mutual funds would increase in value as the stock ...
