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Obvious Questions

On Saturday Susie caught a Wall Street Journal interview on nationalizing banks with Nouriel Roubini [AKA Dr. Doom]. In the article this point is made:

…I wish there had been more financial and business journalists, in the good years, who’d said, ‘Wait a moment, if this man, or this firm, is making a 100% return a year, how do they do it? Is it because they’re smarter than everybody else . . . or because they’re taking so much risk they’ll be bankrupt two years down the line?’

On Friday in my post I made the point:

Normally, stock holders lose, but they should have been demanding truth from management and not taken rosy scenarios accompanied by high dividends for granted. When a corporation starts doing a whole lot better than anyone else in their sector, they may have discovered the perfect business plan, but it is more probable that whatever they are doing is going to end badly.

Am I in Dr. Doom’s class? Not a chance, but the basic question stares out at you from these events and it goes back to a line from every fraud prevention talk you will ever hear: “If it sounds too good to be true, it probably isn’t”.