The Wall Street Journal has up an article with a great story about some really bad investment ideas out there. Here’s a funny one:
Several years ago, a client of Stewart McLauchlan said he had an “opportunity to purchase some ostrich eggs at below the current market,” Mr. McLauchlan says. Red flags went up for the Richardson, Texas, certified financial planner.
The client said once the eggs hatched, he could sell the chicks or raise them and watch the birds appreciate as they matured into breeders. What’s more, the client said if he was fortunate enough to get a pair, they could produce and his “wealth would be made.” He said the eggs cost $5,000 each and a mature ostrich could bring in $20,000 to $30,000 if you “hit the market at the right time.”
“I looked at him in amazement,” says Mr. McLauchlan. “It was evident he was motivated by the return and had not thought through the pros and cons.”
He then explained to the client some of the risks: The investment was a fad; the client knew nothing about ostrich farming (or any other type of agricultural venture, for that matter); and knew nothing about the investment group that represented the ostrich farm.
Mr. McLauchlan says he tried to persuade his client with “every angle” he could think of not to invest.
However, he found out months later the client had purchased four eggs at $5,000 each. The client said that the eggs, unfortunately, spoiled and that he was told by the ostrich farm that some type of bacteria had gotten into the shells and contaminated them.
“He told me not to tell anybody about this situation—especially his wife,” says Mr. McLauchlan. “I believe he learned his lesson.”
Photo by johpan.