Posted By Felix A. Montelara
Author: Potencial Millonario
Boxing legend Felix “Tito” Trinidad is brought to his knees by a 68 million investment loss. However, the knockout blow may be the reported debt of approximately nine million dollars.
Felix Trinidad, in an attempt to be responsible with his assets obtained a brokerage firm, “Popular Securities,” to manage his well-earned fortune. Now I’m going to explain how it is possible to lose an estimated 68 million dollars even if it is invested by a third party and you (or in this case Trinidad) are not monitoring the account. According to reports, José ‘Pepe’ Ramos was assigned by Popular Securities to handle Trinidad’s account. Ramos invested most if not all the money in bonds, according to news reports in Puerto Rico. The truth is that until September 2013, this type of investment was not risky on face value. The problem began in September 2013 when the markets (Moody’s and the S&P 500) downgraded Puerto Rico’s bonds to junk bond status, hence reducing Trinidad’s wealth (fortune). It is said that Trinidad began to see losses in his statement. Really? Red flag, anyone?
The second problem is that if it is true that Ramos invested 100% of Trinidad’s money in bonds only, we can all see an issue with assets allocation. In lay man words, Ramos placed all the eggs in one basket (Puerto Rico bonds). The right thing to do was to diversify into many assets across the market and invest in several different market sectors, as I would say, “A little of this and a little of that.” Truth be said it is unknown at this time if Trinidad asked to be conservative with his investments, or even if Ramos was authorized to invest without Trinidad’s consent. No one knows why Ramos decided to place everything into bonds. It is true that before September 2013, Puerto Rico bonds had good ratings in the market and benefited from a triple tax exemption and could be enticing- or as I would say it would have been “sexy” to invest in them for any portfolio at that time; however, never at 100% of any portfolio.
One must understand that Trinidad is a former professional athlete and a marvelous boxing World Champion. He is not a finance expert. He took prudent steps to preserve his fortune but that was not enough. The last blow brings Trinidad to his knees by a man without gloves in a suit. The lack of basic personal finance education hurt Trinidad as much as it hurts everyone else. Trinidad would have most likely have avoided this type of situation if he was well trained in personals finances. Its like training for a championship bout and not knowing the opponent. It is alleged that Trinidad noticed losses on his statement. In the boxing world that is like telegraphing a cross punch. With personal finance training Trinidad may have seen the knee dropping blow coming his way. When Trinidad
received his earning statement reports with some personal finance training he could have determined that all the eggs were in one basket and we all know in personal finances that is not a good thing.
Also with a good personal financial education a millionaire worth 68 plus may have not carried with an estimated nine million in debts. Why would Trinidad? Anyone trained or educated in the basics of personal finance knows that the debt is the most powerful opponent, who most likely provides the knock out blow when you are already down on your knees. But as they say in my neighborhood: “to late,” the money was invested and lost. The only controversy is whether Ramos was authorized by Trinidad to place the eggs in one basket. Ramos, along with Popular Securities, will defend themselves as if they were in a championship bout and the truth will be known in court.
If you were in Trinidad’s shoes, would you have the know-how to foresee that ultimately it is your responsibility to watch over your money?
Finally, we are celebrating Financial Literacy month in April. Wise up! Get educated in personal finance and do not allow yourself to be victimized due to financial ignorance. Remember, we all have “The Potential Millionaire.”